G.R. No.

L-26379 December 27, 1969

WILLIAM C. REAGAN, ETC., petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.

Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete,
Solicitor Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.

FERNANDO, J.:

A question novel in character, the answer to which has far-reaching implications, is raised by petitioner
William C. Reagan, at one time a civilian employee of an American corporation providing technical
assistance to the United States Air Force in the Philippines. He would dispute the payment of the income
tax assessed on him by respondent Commissioner of Internal Revenue on an amount realized by him on
a sale of his automobile to a member of the United States Marine Corps, the transaction having taken
place at the Clark Field Air Base at Pampanga. It is his contention, seriously and earnestly expressed, that
in legal contemplation the sale was made outside Philippine territory and therefore beyond our
jurisdictional power to tax.

Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he would justify by
invoking, mistakenly as will hereafter be more fully shown an observation to that effect in a 1951
opinion, 1 petitioner ignoring that such utterance was made purely as a flourish of rhetoric and by way of
emphasizing the decision reached, that the trading firm as purchaser of army goods must respond for
the sales taxes due from an importer, as the American armed forces being exempt could not be taxed as
such under the National Internal Revenue Code.2 Such an assumption, inspired by the commendable aim
to render unavailing any attempt at tax evasion on the part of such vendee, found expression anew in a
1962 decision,3 coupled with the reminder however, to render the truth unmistakable, that "the areas
covered by the United States Military Bases are not foreign territories both in the political and
geographical sense."

As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is moreover obiter.
It certainly cannot control the resolution of the specific question that confronts us. We declare our stand
in an unequivocal manner. The sale having taken place on what indisputably is Philippine territory,
petitioner's liability for the income tax due as a result thereof was unavoidable. As the Court of Tax
Appeals reached a similar conclusion, we sustain its decision now before us on appeal.

In the decision appealed from, the Court of Tax Appeals, after stating the nature of the case, started the
recital of facts thus: "It appears that petitioner, a citizen of the United States and an employee of Bendix
Radio, Division of Bendix Aviation Corporation, which provides technical assistance to the United States
Air Force, was assigned at Clark Air Base, Philippines, on or about July 7, 1959 ... . Nine (9) months
thereafter and before his tour of duty expired, petitioner imported on April 22, 1960 a tax-free 1960
Cadillac car with accessories valued at $6,443.83, including freight, insurance and other charges."4 Then
came the following: "On July 11, 1960, more than two (2) months after the 1960 Cadillac car was
imported into the Philippines, petitioner requested the Base Commander, Clark Air Base, for a permit to
sell the car, which was granted provided that the sale was made to a member of the United States
Armed Forces or a citizen of the United States employed in the U.S. military bases in the Philippines. On
the same date, July 11, 1960, petitioner sold his car for $6,600.00 to a certain Willie Johnson, Jr. (Private
first class), United States Marine Corps, Sangley Point, Cavite, Philippines, as shown by a Bill of Sale . . .
executed at Clark Air Base. On the same date, Pfc. Willie (William) Johnson, Jr. sold the car to Fred
Meneses for P32,000.00 as evidenced by a deed of sale executed in Manila."5
As a result of the transaction thus made, respondent Commissioner of Internal Revenue, after deducting
the landed cost of the car as well as the personal exemption to which petitioner was entitled, fixed as
his net taxable income arising from such transaction the amount of P17,912.34, rendering him liable for
income tax in the sum of P2,979.00. After paying the sum, he sought a refund from respondent claiming
that he was exempt, but pending action on his request for refund, he filed the case with the Court of Tax
Appeals seeking recovery of the sum of P2,979.00 plus the legal rate of interest.

As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the
said income tax of P2,979.00 was legally collected by respondent for petitioner."6 After discussing the
legal issues raised, primarily the contention that the Clark Air Base "in legal contemplation, is a base
outside the Philippines" the sale therefore having taken place on "foreign soil", the Court of Tax Appeals
found nothing objectionable in the assessment and thereafter the payment of P2,979.00 as income tax
and denied the refund on the same. Hence, this appeal predicated on a legal theory we cannot accept.
Petitioner cannot make out a case for reversal.

1. Resort to fundamentals is unavoidable to place things in their proper perspective, petitioner

apparently feeling justified in his refusal to defer to basic postulates of constitutional and international
law, induced no doubt by the weight he would accord to the observation made by this Court in the two
opinions earlier referred to. To repeat, scant comfort, if at all is to be derived from such an obiter
dictum, one which is likewise far from reflecting the fact as it is.

Nothing is better settled than that the Philippines being independent and sovereign, its authority may
be exercised over its entire domain. There is no portion thereof that is beyond its power. Within its
limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone to
whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and
personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of its
sovereignty.

It is to be admitted that any state may, by its consent, express or implied, submit to a restriction of its
sovereign rights. There may thus be a curtailment of what otherwise is a power plenary in character.
That is the concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is the
property of a state-force due to which it has the exclusive capacity of legal self-determination and self-
restriction."7 A state then, if it chooses to, may refrain from the exercise of what otherwise is illimitable
competence.

Its laws may as to some persons found within its territory no longer control. Nor does the matter end
there. It is not precluded from allowing another power to participate in the exercise of jurisdictional
right over certain portions of its territory. If it does so, it by no means follows that such areas become
impressed with an alien character. They retain their status as native soil. They are still subject to its
authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the bases under
lease to the American armed forces by virtue of the military bases agreement of 1947. They are not and
cannot be foreign territory.

Decisions coming from petitioner's native land, penned by jurists of repute, speak to that effect with
impressive unanimity. We start with the citation from Chief Justice Marshall, announced in the leading
case of Schooner Exchange v. M'Faddon,8 an 1812 decision: "The jurisdiction of the nation within its own
territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any
restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty
to the extent of the restriction, and an investment of that sovereignty to the same extent in that power
which could impose such restriction." After which came this paragraph: "All exceptions, therefore, to the
full and complete power of a nation within its own territories, must be traced up to the consent of the
nation itself. They can flow from no other legitimate source."
Chief Justice Taney, in an 1857 decision,9 affirmed the fundamental principle of everyone within the
territorial domain of a state being subject to its commands: "For undoubtedly every person who is found
within the limits of a government, whether the temporary purposes or as a resident, is bound by its
laws." It is no exaggeration then for Justice Brewer to stress that the United States government "is one
having jurisdiction over every foot of soil within its territory, and acting directly upon each [individual
found therein]; . . ."10

Not too long ago, there was a reiteration of such a view, this time from the pen of Justice Van Devanter.
Thus: "It now is settled in the United States and recognized elsewhere that the territory subject to its
jurisdiction includes the land areas under its dominion and control the ports, harbors, bays, and other in
closed arms of the sea along its coast, and a marginal belt of the sea extending from the coast line
outward a marine league, or 3 geographic miles."11 He could cite moreover, in addition to many
American decisions, such eminent treatise-writers as Kent, Moore, Hyde, Wilson, Westlake, Wheaton
and Oppenheim.

As a matter of fact, the eminent commentator Hyde in his three-volume work on International Law, as
interpreted and applied by the United States, made clear that not even the embassy premises of a
foreign power are to be considered outside the territorial domain of the host state. Thus: "The ground
occupied by an embassy is not in fact the territory of the foreign State to which the premises belong
through possession or ownership. The lawfulness or unlawfulness of acts there committed is
determined by the territorial sovereign. If an attache commits an offense within the precincts of an
embassy, his immunity from prosecution is not because he has not violated the local law, but rather for
the reason that the individual is exempt from prosecution. If a person not so exempt, or whose
immunity is waived, similarly commits a crime therein, the territorial sovereign, if it secures custody of
the offender, may subject him to prosecution, even though its criminal code normally does not
contemplate the punishment of one who commits an offense outside of the national domain. It is not
believed, therefore, that an ambassador himself possesses the right to exercise jurisdiction, contrary to
the will of the State of his sojourn, even within his embassy with respect to acts there committed. Nor is
there apparent at the present time any tendency on the part of States to acquiesce in his exercise of
it."12

2. In the light of the above, the first and crucial error imputed to the Court of Tax Appeals to the effect
that it should have held that the Clark Air Force is foreign soil or territory for purposes of income tax
legislation is clearly without support in law. As thus correctly viewed, petitioner's hope for the reversal
of the decision completely fades away. There is nothing in the Military Bases Agreement that lends
support to such an assertion. It has not become foreign soil or territory. This country's jurisdictional
rights therein, certainly not excluding the power to tax, have been preserved. As to certain tax matters,
an appropriate exemption was provided for.

Petitioner could not have been unaware that to maintain the contrary would be to defy reality and
would be an affront to the law. While his first assigned error is thus worded, he would seek to impart
plausibility to his claim by the ostensible invocation of the exemption clause in the Agreement by virtue
of which a "national of the United States serving in or employed in the Philippines in connection with
the construction, maintenance, operation or defense of the bases and residing in the Philippines only by
reason of such employment" is not to be taxed on his income unless "derived from Philippine source or
sources other than the United States sources."13 The reliance, to repeat, is more apparent than real for
as noted at the outset of this opinion, petitioner places more faith not on the language of the provision
on exemption but on a sentiment given expression in a 1951 opinion of this Court, which would be made
to yield such an unwarranted interpretation at war with the controlling constitutional and international
law principles. At any rate, even if such a contention were more adequately pressed and insisted upon,
it is on its face devoid of merit as the source clearly was Philippine.

In Saura Import and Export Co. v. Meer,14 the case above referred to, this Court affirmed a decision
rendered about seven months previously,15 holding liable as an importer, within the contemplation of
the National Internal Revenue Code provision, the trading firm that purchased army goods from a
United States government agency in the Philippines. It is easily understandable why. If it were not thus,
tax evasion would have been facilitated. The United States forces that brought in such equipment later
disposed of as surplus, when no longer needed for military purposes, was beyond the reach of our tax
statutes.

Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting extensively from the
earlier opinion. He could have stopped there. He chose not to do so. The transaction having occurred in
1946, not so long after the liberation of the Philippines, he proceeded to discuss the role of the
American military contingent in the Philippines as a belligerent occupant. In the course of such a
dissertion, drawing on his well-known gift for rhetoric and cognizant that he was making an as
if statement, he did say: "While in army bases or installations within the Philippines those goods were in
contemplation of law on foreign soil."

It is thus evident that the first, and thereafter the controlling, decision as to the liability for sales taxes as
an importer by the purchaser, could have been reached without any need for such expression as that
given utterance by Justice Tuason. Its value then as an authoritative doctrine cannot be as much as
petitioner would mistakenly attach to it. It was clearly obiter not being necessary for the resolution of
the issue before this Court.16It was an opinion "uttered by the way."17 It could not then be controlling on
the question before us now, the liability of the petitioner for income tax which, as announced at the
opening of this opinion, is squarely raised for the first time.18

On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a maxim, not to be
disregarded, that general expressions, in every opinion, are to be taken in connection with the case in
which those expressions are used. If they go beyond the case, they may be respected, but ought not to
control the judgment in a subsequent suit when the very point is presented for decision."19

Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector of Internal
Revenue,20 a 1962 decision relied upon by petitioner, put a different complexion on the matter. Again, it
was by way of pure embellishment, there being no need to repeat it, to reach the conclusion that it was
the purchaser of army goods, this time from military bases, that must respond for the advance sales
taxes as importer. Again, the purpose that animated the reiteration of such a view was clearly to
emphasize that through the employment of such a fiction, tax evasion is precluded. What is more, how
far divorced from the truth was such statement was emphasized by Justice Barrera, who penned the Co
Po opinion, thus: "It is true that the areas covered by the United States Military Bases are not foreign
territories both in the political and geographical sense."21

Justice Tuason moreover made explicit that rather than corresponding with reality, what was said by
him was in the way of a legal fiction. Note his stress on "in contemplation of law." To lend further
support to a conclusion already announced, being at that a confirmation of what had been arrived at in
the earlier case, distinguished by its sound appreciation of the issue then before this Court and to
preclude any tax evasion, an observation certainly not to be taken literally was thus given utterance.

This is not to say that it should have been ignored altogether afterwards. It could be utilized again, as it
undoubtedly was, especially so for the purpose intended, namely to stigmatize as without support in law
any attempt on the part of a taxpayer to escape an obligation incumbent upon him. So it was quoted
with that end in view in the Co Po case. It certainly does not justify any effort to render futile the
collection of a tax legally due, as here. That was farthest from the thought of Justice Tuason.

What is more, the statement on its face is, to repeat, a legal fiction. This is not to discount the uses of
a fictio jurisin the science of the law. It was Cardozo who pointed out its value as a device "to advance
the ends of justice" although at times it could be "clumsy" and even "offensive".22 Certainly, then, while
far from objectionable as thus enunciated, this observation of Justice Tuason could be misused or
misconstrued in a clumsy manner to reach an offensive result. To repeat, properly used, a legal fiction
could be relied upon by the law, as Frankfurter noted, in the pursuit of legitimate ends.23 Petitioner then
would be well-advised to take to heart such counsel of care and circumspection before invoking not a
legal fiction that would avoid a mockery of the law by avoiding tax evasion but what clearly is a
misinterpretation thereof, leading to results that would have shocked its originator.

The conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion to
the effect that for income tax purposes the Clark Air Force Base is outside Philippine territory, is utterly
without merit. So we have said earlier.

3. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is,
to paraphrase Frankfurter, to be guilty of succumbing to the vice of literalness. To so conclude is,
whether by design or inadvertence, to misread it. It certainly is not susceptible of the mischievous
consequences now sought to be fastened on it by petitioner.

That it would be fraught with such peril to the enforcement of our tax statutes on the military bases
under lease to the American armed forces could not have been within the contemplation of Justice
Tuason. To so attribute such a bizarre consequence is to be guilty of a grave disservice to the memory of
a great jurist. For his real and genuine sentiment on the matter in consonance with the imperative
mandate of controlling constitutional and international law concepts was categorically set forth by him,
not as an obiter but as the rationale of the decision, in People v. Acierto24 thus: "By the [Military Bases]
Agreement, it should be noted, the Philippine Government merely consents that the United States
exercise jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or
expediency over the bases as part of the Philippine territory or divested itself completely of jurisdiction
over offenses committed therein."

Nor did he stop there. He did stress further the full extent of our territorial jurisdiction in words that do
not admit of doubt. Thus: "This provision is not and can not on principle or authority be construed as a
limitation upon the rights of the Philippine Government. If anything, it is an emphatic recognition and
reaffirmation of Philippine sovereignty over the bases and of the truth that all jurisdictional rights
granted to the United States and not exercised by the latter are reserved by the Philippines for itself."25

It is in the same spirit that we approach the specific question confronting us in this litigation. We hold,
as announced at the outset, that petitioner was liable for the income tax arising from a sale of his
automobile in the Clark Field Air Base, which clearly is and cannot otherwise be other than, within our
territorial jurisdiction to tax.

4. With the mist thus lifted from the situation as it truly presents itself, there is nothing that stands in
the way of an affirmance of the Court of Tax Appeals decision. No useful purpose would be served by
discussing the other assigned errors, petitioner himself being fully aware that if the Clark Air Force Base
is to be considered, as it ought to be and as it is, Philippine soil or territory, his claim for exemption from
the income tax due was distinguished only by its futility.

There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal. We
thus manifest fealty to a pronouncement made time and time again that the law does not look with
favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too
plain to be mistaken and too categorical to be misinterpreted.26 Petitioner had not done so. Petitioner
cannot do so.

WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of P2,979.00
as the income tax paid by petitioner is affirmed. With costs against petitioner.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ., concur.
G.R. No. L-13250 October 29, 1971

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
ANTONIO CAMPOS RUEDA, respondent..

Assistant Solicitor General Jose P. Alejandro and Special Attorney Jose G. Azurin, (O.S.G.) for petitioner.

Ramirez and Ortigas for respondent.

FERNANDO, J.:

The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a decision of the
Court of Tax Appeals as to whether or not the requisites of statehood, or at least so much thereof as
may be necessary for the acquisition of an international personality, must be satisfied for a "foreign
country" to fall within the exemption of Section 122 of the National Internal Revenue Code 1 is now ripe
for adjudication. The Court of Tax Appeals answered the question in the negative, and thus reversed the
action taken by petitioner Collector, who would hold respondent Antonio Campos Rueda, as
administrator of the estate of the late Estrella Soriano Vda. de Cerdeira, liable for the sum of
P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal properties
in the Philippines, the deceased, a Spanish national having been a resident of Tangier, Morocco from
1931 up to the time of her death in 1955. In an earlier resolution promulgated May 30, 1962, this Court
on the assumption that the need for resolving the principal question would be obviated, referred the
matter back to the Court of Tax Appeals to determine whether the alleged law of Tangier did grant the
reciprocal tax exemption required by the aforesaid Section 122. Then came an order from the Court of
Tax Appeals submitting copies of legislation of Tangier that would manifest that the element of
reciprocity was not lacking. It was not until July 29, 1969 that the case was deemed submitted for
decision. When the petition for review was filed on January 2, 1958, the basic issue raised was
impressed with an element of novelty. Four days thereafter, however, on January 6, 1958, it was held by
this Court that the aforesaid provision does not require that the "foreign country" possess an
international personality to come within its terms. 2 Accordingly, we have to affirm.

The decision of the Court of Tax Appeals, now under review, sets forth the background facts as follows:
"This is an appeal interposed by petitioner Antonio Campos Rueda as administrator of the estate of the
deceased Doña Maria de la Estrella Soriano Vda. de Cerdeira, from the decision of the respondent
Collector of Internal Revenue, assessing against and demanding from the former the sum P161,874.95
as deficiency estate and inheritance taxes, including interest and penalties, on the transfer of intangible
personal properties situated in the Philippines and belonging to said Maria de la Estrella Soriano Vda. de
Cerdeira. Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a Spanish national,
by reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco from 1931 up to
her death on January 2, 1955. At the time of her demise she left, among others, intangible personal
properties in the Philippines." 3 Then came this portion: "On September 29, 1955, petitioner filed a
provisional estate and inheritance tax return on all the properties of the late Maria Cerdeira. On the
same date, respondent, pending investigation, issued an assessment for state and inheritance taxes in
the respective amounts of P111,592.48 and P157,791.48, or a total of P369,383.96 which tax liabilities
were paid by petitioner ... . On November 17, 1955, an amended return was filed ... wherein intangible
personal properties with the value of P396,308.90 were claimed as exempted from taxes. On November
23, 1955, respondent, pending investigation, issued another assessment for estate and inheritance taxes
in the amounts of P202,262.40 and P267,402.84, respectively, or a total of P469,665.24 ... . In a letter
dated January 11, 1956, respondent denied the request for exemption on the ground that the law of
Tangier is not reciprocal to Section 122 of the National Internal Revenue Code. Hence, respondent
demanded the payment of the sums of P239,439.49 representing deficiency estate and inheritance
taxes including ad valorem penalties, surcharges, interests and compromise penalties ... . In a letter
dated February 8, 1956, and received by respondent on the following day, petitioner requested for the
reconsideration of the decision denying the claim for tax exemption of the intangible personal
properties and the imposition of the 25% and 5% ad valorem penalties ... . However, respondent denied
request, in his letter dated May 5, 1956 ... and received by petitioner on May 21, 1956. Respondent
premised the denial on the grounds that there was no reciprocity [with Tangier, which was moreover] a
mere principality, not a foreign country. Consequently, respondent demanded the payment of the sums
of P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as deficiency estate and
inheritance taxes including surcharges, interests and compromise penalties." 4

The matter was then elevated to the Court of Tax Appeals. As there was no dispute between the parties
regarding the values of the properties and the mathematical correctness of the deficiency assessments,
the principal question as noted dealt with the reciprocity aspect as well as the insisting by the Collector
of Internal Revenue that Tangier was not a foreign country within the meaning of Section 122. In ruling
against the contention of the Collector of Internal Revenue, the appealed decision states: "In fine, we
believe, and so hold, that the expression "foreign country", used in the last proviso of Section 122 of the
National Internal Revenue Code, refers to a government of that foreign power which, although not an
international person in the sense of international law, does not impose transfer or death upon
intangible person properties of our citizens not residing therein, or whose law allows a similar
exemption from such taxes. It is, therefore, not necessary that Tangier should have been recognized by
our Government order to entitle the petitioner to the exemption benefits of the proviso of Section 122
of our Tax. Code." 5

Hence appeal to this court by petitioner. The respective briefs of the parties duly submitted, but as
above indicated, instead of ruling definitely on the question, this Court, on May 30, 1962, resolve to
inquire further into the question of reciprocity and sent back the case to the Court of Tax Appeals for
the motion of evidence thereon. The dispositive portion of such resolution reads as follows: "While
section 122 of the Philippine Tax Code aforequoted speaks of 'intangible personal property' in both
subdivisions (a) and (b); the alleged laws of Tangier refer to 'bienes muebles situados en Tanger', 'bienes
muebles radicantes en Tanger', 'movables' and 'movable property'. In order that this Court may be able
to determine whether the alleged laws of Tangier grant the reciprocal tax exemptions required by
Section 122 of the Tax Code, and without, for the time being, going into the merits of the issues raised
by the petitioner-appellant, the case is [remanded] to the Court of Tax Appeals for the reception of
evidence or proof on whether or not the words `bienes muebles', 'movables' and 'movable properties as
used in the Tangier laws, include or embrace 'intangible person property', as used in the Tax Code." 6 In
line with the above resolution, the Court of Tax Appeals admitted evidence submitted by the
administrator petitioner Antonio Campos Rueda, consisting of exhibits of laws of Tangier to the effect
that "the transfers by reason of death of movable properties, corporeal or incorporeal, including
furniture and personal effects as well as of securities, bonds, shares, ..., were not subject, on that date
and in said zone, to the payment of any death tax, whatever might have been the nationality of the
deceased or his heirs and legatees." It was further noted in an order of such Court referring the matter
back to us that such were duly admitted in evidence during the hearing of the case on September 9,
1963. Respondent presented no evidence." 7

The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue
Code. It reads thus: "That no tax shall be collected under this Title in respect of intangible personal
property (a) if the decedent at the time of his death was a resident of a foreign country which at the
time of his death did not impose a transfer tax or death tax of any character in respect of intangible
person property of the Philippines not residing in that foreign country, or (b) if the laws of the foreign
country of which the decedent was a resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country." 8 The only obstacle therefore to a
definitive ruling is whether or not as vigorously insisted upon by petitioner the acquisition of internal
personality is a condition sine qua non to Tangier being considered a "foreign country". Deference to the
De Lara ruling, as was made clear in the opening paragraph of this opinion, calls for an affirmance of the
decision of the Court of Tax Appeals.
It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line
with Pound's formulation that it be a politically organized sovereign community independent of outside
control bound by penalties of nationhood, legally supreme within its territory, acting through a
government functioning under a regime of
law. 9 It is thus a sovereign person with the people composing it viewed as an organized corporate
society under a government with the legal competence to exact obedience to its commands. 10 It has
been referred to as a body-politic organized by common consent for mutual defense and mutual safety
and to promote the general welfare. 11 Correctly has it been described by Esmein as "the juridical
personification of the nation." 12 This is to view it in the light of its historical development. The stress is
on its being a nation, its people occupying a definite territory, politically organized, exercising by means
of its government its sovereign will over the individuals within it and maintaining its separate
international personality. Laski could speak of it then as a territorial society divided into government and
subjects, claiming within its allotted area a supremacy over all other institutions. 13 McIver similarly
would point to the power entrusted to its government to maintain within its territory the conditions of a
legal order and to enter into international relations. 14 With the latter requisite satisfied, international
law do not exact independence as a condition of statehood. So Hyde did opine. 15

Even on the assumption then that Tangier is bereft of international personality, petitioner has not
successfully made out a case. It bears repeating that four days after the filing of this petition on January
6, 1958 in Collector of Internal Revenue v. De Lara, 16 it was specifically held by us: "Considering the State
of California as a foreign country in relation to section 122 of our Tax Code we believe and hold, as did
the Tax Court, that the Ancilliary Administrator is entitled the exemption from the inheritance tax on the
intangible personal property found in the Philippines." 17 There can be no doubt that California as a state
in the American Union was in the alleged requisite of international personality. Nonetheless, it was held
to be a foreign country within the meaning of Section 122 of the National Internal Revenue Code. 18

What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the doctrine
that even a tiny principality, that of Liechtenstein, hardly an international personality in the sense, did
fall under this exempt category. So it appears in an opinion of the Court by the then Acting Chief
Justicem Bengson who thereafter assumed that position in a permanent capacity, in Kiene v. Collector of
Internal Revenue. 19 As was therein noted: 'The Board found from the documents submitted to it —
proof of the laws of Liechtenstein — that said country does not impose estate, inheritance and gift taxes
on intangible property of Filipino citizens not residing in that country. Wherefore, the Board declared
that pursuant to the exemption above established, no estate or inheritance taxes were collectible,
Ludwig Kiene being a resident of Liechtestein when he passed away." 20 Then came this definitive ruling:
"The Collector — hereafter named the respondent — cites decisions of the United States Supreme Court
and of this Court, holding that intangible personal property in the Philippines belonging to a non-
resident foreigner, who died outside of this country is subject to the estate tax, in disregard of the
principle 'mobilia sequuntur personam'. Such property is admittedly taxable here. Without the proviso
above quoted, the shares of stock owned here by the Ludwig Kiene would be concededly subject to
estate and inheritance taxes. Nevertheless our Congress chose to make an exemption where conditions
are such that demand reciprocity — as in this case. And the exemption must be honored." 21

WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is affirmed.
Without pronouncement as to costs.

G.R. No. L-36409 October 26, 1973

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
LORETA GOZO, defendant-appellant.

Office of the Solicitor General Felix Q. Antonio, Assistant Solicitor General Jaime M. Lantin and Solicitor
Norberto P. Eduardo for plaintiff-appellee.
Jose T. Nery for defendant-appellant.

FERNANDO, J.:

Appellant seeks to set aside a judgment of the Court of First Instance of Zambales, convicting her of a
violation of an ordinance of Olongapo, Zambales, requiring a permit from the municipal mayor for the
construction or erection of a building, as well as any modification, alteration, repair or demolition
thereof. She questions its validity, or at the very least, its applicability to her, by invoking due process, 1 a
contention she would premise on what for her is the teaching of People v. Fajardo. 2 If such a ground
were far from being impressed with solidity, she stands on quicksand when she would deny the
applicability of the ordinance to her, on the pretext that her house was constructed within the naval
base leased to the American armed forces. While yielding to the well-settled doctrine that it does not
thereby cease to be Philippine territory, she would, in effect, seek to emasculate our sovereign rights by
the assertion that we cannot exercise therein administrative jurisdiction. To state the proposition is to
make patent how much it is tinged with unorthodoxy. Clearly then, the lower court decision must be
affirmed with the sole modification that she is given thirty days from the finality of a judgment to obtain
a permit, failing which, she is required to demolish the same.

The facts are undisputed. As set forth in the decision of the lower court: "The accused bought a house
and lot located inside the United States Naval Reservation within the territorial jurisdiction of Olongapo
City. She demolished the house and built another one in its place, without a building permit from the
City Mayor of Olongapo City, because she was told by one Ernesto Evalle, an assistant in the City
Mayor's office, as well as by her neighbors in the area, that such building permit was not necessary for
the construction of the house. On December 29, 1966, Juan Malones, a building and lot inspector of the
City Engineer's Office, Olongapo City, together with Patrolman Ramon Macahilas of the Olongapo City
police force apprehended four carpenters working on the house of the accused and they brought the
carpenters to the Olongapo City police headquarters for interrogation. ... After due investigation, Loreta
Gozo was charged with violation of Municipal Ordinance No. 14, S. of 1964 with the City Fiscal's
Office." 3 The City Court of Olongapo City found her guilty of violating Municipal Ordinance No. 14, Series
of 1964 and sentenced her to an imprisonment of one month as well as to pay the costs. The Court of
Instance of Zambales, on appeal, found her guilty on the above facts of violating such municipal
ordinance but would sentence her merely to pay a fine of P200.00 and to demolish the house thus
erected. She elevated the case to the Court of Appeals but in her brief, she would put in issue the
validity of such an ordinance on constitutional ground or at the very least its applicability to her in view
of the location of her dwelling within the naval base. Accordingly, the Court of Appeals, in a resolution of
January 29, 1973, noting the constitutional question raised, certified the case to this Court.

There is, as mentioned in the opening paragraph of this petition, no support in law for the stand taken
by appellant.

1. It would be fruitless for her to assert that local government units are devoid of authority to require
building permits. This Court, from Switzer v. Municipality of
Cebu, 4 decided in 1911, has sanctioned the validity of such measures. It is much too late in the day to
contend that such a requirement cannot be validly imposed. Even appellant, justifiably concerned about
the unfavorable impression that could be created if she were to deny that such competence is vested in
municipal corporations and chartered cities, had to concede in her brief: "If, at all; the questioned
ordinance may be predicated under the general welfare clause ... ." 5 Its scope is wide, well-nigh all
embracing, covering every aspect of public health, public morals, public safety, and the well being and
good order of the community. 6

It goes without saying that such a power is subject to limitations. Certainly, if its exercise is violative of
any constitutional right, then its validity could be impugned, or at the very least, its applicability to the
person adversely affected could be questioned. So much is settled law. Apparently, appellant has
adopted the view that a due process question may indeed be raised in view of what for her is its
oppressive character. She is led to such a conclusion, relying on People v. Fajardo. 7 A more careful
scrutiny of such a decision would not have led her astray, for that case is easily distinguishable. The facts
as set forth in the opinion follow: "It appears that on August 15, 1950, during the incumbency of
defendant-appellant Juan F. Fajardo as mayor of the municipality of Baao, Camarines Sur, the municipal
council passed the ordinance in question providing as follows: "... 1. Any person or persons who will
construct or repair a building should, before constructing or repairing, obtain a written permit from the
Municipal Mayor. ... 2. A fee of not less than P2.00 should be charged for each building permit and P1.00
for each repair permit issued. ... 3. [Penalty]-Any violation of the provisions of the above, this ordinance,
shall make the violator liable to pay a fine of not less than P25 nor more than P50 or imprisonment of
not less than 12 days nor more than 24 days or both, at the discretion of the court. If said building
destroys the view of the Public Plaza or occupies any public property, it shall be removed at the expense
of the owner of the building or house. ... ." Four years later, after the term of appellant Fajardo as mayor
had expired, he and his son-in-law, appellant Babilonia, filed a written request with the incumbent
municipal mayor for a permit to construct a building adjacent to their gasoline station on a parcel of
land registered in Fajardo's name, located along the national highway and separated from the public
plaza by a creek ... . On January 16, 1954, the request was denied, for the reason among others that the
proposed building would destroy the view or beauty of the public plaza ... . On January 18, 1954,
defendants reiterated their request for a building permit ..., but again the request was turned down by
the mayor. Whereupon, appellants proceeded with the construction of the building without a permit,
because they needed a place of residence very badly, their former house having been destroyed by a
typhoon and hitherto they had been living on leased property." 8

Clearly then, the application of such an ordinance to Fajardo was oppressive. A conviction therefore for
a violation thereof both in the justice of the peace court of Baao, Camarines Sur as well as in the Court
of First Instance could not be sustained. In this case, on the contrary, appellant never bothered to
comply with the ordinance. Perhaps aware of such a crucial distinction, she would assert in her brief:
"The evidence showed that even if the accused were to secure a permit from the Mayor, the same
would not have been granted. To require the accused to obtain a permit before constructing her house
would be an exercise in futility. The law will not require anyone to perform an impossibility, neither in
law or in fact: ... ." 9 It would be from her own version, at the very least then, premature to anticipate
such an adverse result, and thus to condemn an ordinance which certainly lends itself to an
interpretation that is neither oppressive, unfair, or unreasonable. That kind of interpretation suffices to
remove any possible question of its validity, as was expressly announced in Primicias v. Fugoso. 10 So it
appears from this portion of the opinion of Justice Feria, speaking for the Court: "Said provision is
susceptible of two constructions: one is that the Mayor of the City of Manila is vested with unregulated
discretion to grant or refuse to grant permit for the holding of a lawful assembly or meeting, parade, or
procession in the streets and other public places of the City of Manila; and the other is that the applicant
has the right to a permit which shall be granted by the Mayor, subject only to the latter's reasonable
discretion to determine or specify the streets or public places to be used for the purpose, with a view to
prevent confusion by overlapping, to secure convenient use of the streets and public places by others,
and to provide adequate and proper policing to minimize the risk of disorder. After a mature
deliberation, we have arrived at the conclusion that we must adopt the second construction, that is,
construe the provisions of the said ordinance to mean that it does not confer upon the Mayor the power
to refuse to grant the permit, but only the discretion, in issuing the permit, to determine or specify the
streets or public places where the parade or procession may pass or the meeting may be held." 11 If, in a
case affecting such a preferred freedom as the right to assembly, this Court could construe an ordinance
of the City of Manila so as to avoid offending against a constitutional provision, there is nothing to
preclude it from a similar mode of approach in order to show the lack of merit of an attack against an
ordinance requiring a permit. Appellant cannot therefore take comfort from any broad statement in the
Fajardo opinion, which incidentally is taken out of context, considering the admitted oppressive
application of the challenged measure in that litigation. So much then for the contention that she could
not have been validly convicted for a violation of such ordinance. Nor should it be forgotten that she did
suffer the same fate twice, once from the City Court and thereafter from the Court of First Instance. The
reason is obvious.Such ordinance applies to her.
2. Much less is a reversal indicated because of the alleged absence of the rather novel concept of
administrative jurisdiction on the part of Olongapo City. Nor is novelty the only thing that may be said
against it. Far worse is the assumption at war with controlling and authoritative doctrines that the mere
existence of military or naval bases of a foreign country cuts deeply into the power to govern. Two
leading cases may be cited to show how offensive is such thinking to the juristic concept of
sovereignty, People v. Acierto, 12 and Reagan v. Commissioner of Internal Revenue. 13 As was so
emphatically set forth by Justice Tuason in Acierto: "By the Agreement, it should be noted, the
Philippine Government merely consents that the United States exercise jurisdiction in certain cases. The
consent was given purely as a matter of comity, courtesy, or expediency. The Philippine Government has
not abdicated its sovereignty over the bases as part of the Philippine territory or divested itself
completely of jurisdiction over offenses committed therein. Under the terms of the treaty, the United
States Government has prior or preferential but not exclusive jurisdiction of such offenses. The
Philippine Government retains not only jurisdictional rights not granted, but also all such ceded rights as
the United States Military authorities for reasons of their own decline to make use of. The first
proposition is implied from the fact of Philippine sovereignty over the bases; the second from the
express provisions of the treaty." 14 There was a reiteration of such a view in Reagan. Thus: "Nothing is
better settled than that the Philippines being independent and sovereign, its authority may be exercised
over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its decrees
are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies must
submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily,
likewise, it has to be exclusive. If it were not thus, there is a diminution of sovereignty." 15 Then came
this paragraph dealing with the principle of auto-limitation: "It is to be admitted any state may, by its
consent, express or implied, submit to a restriction of its sovereign rights. There may thus be a
curtailment of what otherwise is a power plenary in character. That is the concept of sovereignty as
auto-limitation, which, in the succinct language of Jellinek, "is the property of a state-force due to which
it has the exclusive capacity of legal self-determination and self-restriction." A state then, if it chooses
to, may refrain from the exercise of what otherwise is illimitable competence." 16 The opinion was at
pains to point out though that even then, there is at the most diminution of jurisdictional rights, not its
disappearance. The words employed follow: "Its laws may as to some persons found within its territory
no longer control. Nor does the matter end there. It is not precluded from allowing another power to
participate in the exercise of jurisdictional right over certain portions of its territory. If it does so, it by no
means follows that such areas become impressed with an alien character. They retain their status as
native soil. They are still subject to its authority. Its jurisdiction may be diminished, but it does not
disappear. So it is with the bases under lease to the American armed forces by virtue of the military
bases agreement of 1947. They are not and cannot be foreign territory." 17

Can there be anything clearer, therefore, than that only a turnabout, unwarranted and unjustified, from
what is settled and orthodox law can lend the slightest degree of plausibility to the contention of
absence of administrative jurisdiction. If it were otherwise, what was aptly referred to by Justice Tuason
"as a matter of comity, courtesy, or expediency" becomes one of obeisance and submission. If on a
concern purely domestic in its implications, devoid of any connection with national security, the
Military-Bases Agreement could be thus interpreted, then sovereignty indeed becomes a mockery and
an illusion. Nor does appellant's thesis rest on less shaky foundation by the mere fact that Acierto and
Reagan dealt with the competence of the national government, while what is sought to be emasculated
in this case is the so-called administrative jurisdiction of a municipal corporation. Within the limits of its
territory, whatever statutory powers are vested upon it may be validly exercised. Any residual authority
and therein conferred, whether expressly or impliedly, belongs to the national government, not to an
alien country. What is even more to be deplored in this stand of appellant is that no such claim is made
by the American naval authorities, not that it would do them any good if it were so asserted. To quote
from Acierto anew: "The carrying out of the provisions of the Bases Agreement is the concern of the
contracting parties alone. Whether, therefore, a given case which by the treaty comes within the United
States jurisdiction should be transferred to the Philippine authorities is a matter about which the
accused has nothing to do or say. In other words, the rights granted to the United States by the treaty
insure solely to that country and can not be raised by the offender." 18 If an accused would suffer from
such disability, even if the American armed forces were the beneficiary of a treaty privilege, what is
there for appellant to take hold of when there is absolutely no showing of any alleged grant of what is
quaintly referred to as administrative jurisdiction? That is all, and it is more than enough, to make
manifest the futility of seeking a reversal.

WHEREFORE, the appealed decision of November 11, 1969 is affirmed insofar as it found the accused,
Loreta Gozo, guilty beyond reasonable doubt of a violation of Municipal Ordinance No. 14, series of
1964 and sentencing her to pay a fine of P200.00 with subsidiary imprisonment in case of insolvency,
and modified insofar as she is required to demolish the house that is the subject matter of the case, she
being given a period of thirty days from the finality of this decision within which to obtain the required
permit. Only upon her failure to do so will that portion of the appealed decision requiringdemolition be
enforced. Costs against the accused

PEOPLE OF THE PHILIPPINES, petitioner, vs. SANDIGANBAYAN (2ND DIV.), and JOSE S. RAMISCAL, JR.,
JULIAN ALZAGA, ATTY. MANUEL SATUITO, ELIZABETH LIANG and JESUS GARCIA, respondents.

DECISION
YNARES-SANTIAGO, J.:

Respondents Jose S. Ramiscal, Jr., Julian Alzaga, Manuel Satuito, Elizabeth Liang and Jesus Garcia
were all charged with Malversation through Falsification of Public Documents before the Sandiganbayan
in Criminal Case No. 25741. The Information alleged that respondents misappropriated and converted
for their personal use the amount of P250,318,200.00 from the funds of the Armed Forces of the
Philippines Retirement and Separation Benefits System (AFP-RSBS).[1]
On November 12, 1999, respondent Ramiscal filed with the Sandiganbayan an Urgent Motion to
Declare Nullity of Information and to Defer Issuance of Warrant of Arrest.[2] He argued,inter alia, that
the Sandiganbayan had no jurisdiction over the case because the AFP-RSBS is a private entity. The said
Urgent Motion was later adopted by respondents Alzaga and Satuito.
The Urgent Motion was denied by the Sandiganbayan in a Resolution promulgated on January 6,
2000.[3] Respondents filed a Motion for Reconsideration. In a Resolution issued on May 12, 2000, the
Sandiganbayan sustained respondents contention that the AFP-RSBS is a private entity. Hence, it
reconsidered its earlier Resolution and ordered the dismissal of Criminal Case No. 25741. Upon denial of
its Motion for Reconsideration, the prosecution filed the instant special civil action
for certiorari anchored on the following grounds:
I

RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS

OF JURISDICTION IN ISSUING THE RESOLUTION DATED MAY 9, 2000 INSOFAR AS IT DISMISSED THE CASE
FOR LACK OF JURISDICTION.

II

RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF EXCESS OF

JURISDICTION IN DENYING PROSECUTIONS MOTION FOR RECONSIDERATION DATED JUNE 1, 2000,
SUPPLEMENTAL MOTION FOR RECONSIDERATION DATED JULY 10, 2000 AND SECOND SUPPLEMENTAL
MOTION FOR RECONSIDERATION DATED MAY 12, 2000.[4]

Considering that the Resolution of the Sandiganbayan which dismissed Criminal Case No. 25741
was a final order which finally disposed of the case, the proper remedy therefrom is a petition for review
under Rule 45 of the 1997 Rules of Civil Procedure.[5] Section 1 of said Rule 45 explicitly provides:

Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a judgment or final
order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law which must be distinctly set forth.

Moreover, Section 7 of Presidential Decree No. 1606, as amended by Section 3 of Republic Act No.
7975, states:

Form, Finality and Enforcement of Decisions.

xxx xxx xxx.

Decisions and final orders of the Sandiganbayan shall be appealable to the Supreme Court by petition
for review on certiorari raising pure questions of law in accordance with Rule 45 of the Rules of Court.

Basic is the rule that a special civil action for certiorari under Rule 65 of the Rules may be availed of
only where there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of
law.[6] Certiorari cannot be availed of as a substitute for the lost remedy of an ordinary appeal.[7]
The foregoing rule, however, may be relaxed where the issue raised is one purely of law, where
public interest is involved, and in case of urgency. In such cases, certiorari is allowed notwithstanding
the existence and availability of the remedy of appeal. Certiorari may also be availed of where an appeal
would be slow, inadequate and insufficient.[8] If the strict application of the Rules will tend to frustrate
rather than promote justice, it is always within our power to suspend the rules, or except a particular
case from its operation.[9]
We now come to the substantive issue of whether the AFP-RSBS is a government-owned or
controlled corporation or a private corporation and, corollarily, whether its funds are public or private.
The Sandiganbayan based its ruling that the AFP-RSBS is a private entity on its findings that the
Government does not provide counterpart contribution to the System; that the employees of the AFP-
RSBS do not receive any salary from the Government and are not covered by the salary standardization
law; that their remittances and contributions were made to the Social Security System and not to the
Government Service Insurance System; and that the contribution to the System of the sum of
P200,000,000.00 under Presidential Decree 361 can not be deemed as equity of the government in the
System but rather, a donation or seed money which was never increased thereafter.[10]
Generally, factual findings of the Sandiganbayan are conclusive on us. This rule, however, admits of
exceptions, such as where: (1) the conclusion is a finding grounded entirely on speculation, surmise and
conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on misapprehension of facts; and (5) the findings of fact of the Sandiganbayan are
premised on a want of evidence and are contradicted by evidence on record.[11]
The AFP-RSBS was created by Presidential Decree No. 361. Its purpose and functions are akin to
those of the GSIS and the SSS, as in fact it is the system that manages the retirement and pension funds
of those in the military service. Members of the Armed Forces of the Philippines and the Philippine
National Police are expressly excluded from the coverage of The GSIS Act of 1997.[12] Therefore, soldiers
and military personnel, who are incidentally employees of the Government, rely on the administration
of the AFP-RSBS for their retirement, pension and separation benefits. For this purpose, the law
provides that the contribution by military officers and enlisted personnel to the System shall be
compulsory, thus:

Officers and enlisted personnel in the active service shall contribute to the System an amount equivalent
to four per cent (4%) of their monthly base and longevity pay, which contribution shall be deducted
from their pay from the Armed Forces of the Philippines and paid to the System: Provided, however,
That any officer or enlisted person who is due for compulsory retirement or is optionally retirable and
actually elects to retire within one year from the approval of this Act, shall no longer be required to
contribute to the System: Provided, further, That any officer or enlisted person who is separated
through no fault of his own and is not eligible for either retirement or separation benefits shall upon his
separation, be refunded in one lump sum all his actual contributions to the System plus interest at the
rate of four per cent (4%).[13]

Its enabling law further mandates that the System shall be administered by the Chief of Staff of the
Armed Forces of the Philippines through an agency, group, committee or board, which may be created
and organized by him and subject to such rules and regulations governing the same as he may, subject
to the approval of the Secretary of National Defense, promulgate from time to time. Moreover, the
investment of funds of the System shall be decided by the Chief of Staff of the Armed Forces of the
Philippines with the approval of the Secretary of National Defense.[14]
In connection with the Sandiganbayans finding that the funds of the AFP-RSBS, except for the initial
seed money, come entirely from contributions and that no part thereof come from appropriations,
Section 2 of P.D. 361 states:

SECTION 2. The System shall be funded as follows:

(a) Appropriations and contributions;

(b) Donations, gift, legacies, bequest and others to the System;

(c) All earnings of the System which shall not be subject to any tax whatsoever.

Indeed, the clear import of the above-quoted provision is that, while it may be true that there have
been no appropriations for the contribution of funds to the AFP-RSBS, the Government is not precluded
from later on adding to the funds in order to provide additional benefits to the men in uniform.
The above considerations indicate that the character and operations of the AFP-RSBS are imbued
with public interest. As such, we hold that the same is a government entity and its funds are in the
nature of public funds.
WHEREFORE, in view of the foregoing, the instant petition for certiorari is GRANTED. The assailed
Resolution of the Sandiganbayan dated May 12, 2000 is ANNULLED and SET ASIDE. Criminal Case No.
25741 is ordered REINSTATED, and the Sandiganbayan is DIRECTED to resume proceedings thereon with
dispatch.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio and Azcuna, JJ., concur.

G.R. No. 155650 July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG
PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF PARAÑAQUE, respondents.

DECISION

CARPIO, J.:

The Antecedents

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA)
Complex in Parañaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila
International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then
President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909 1 and 2982 amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA
Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land, 3 including the runways and
buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation. 4 The MIAA Charter further
provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode
unless specifically approved by the President of the Philippines. 5

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC
opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA
under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real
estate tax imposed by the City. MIAA then paid some of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the
taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:

TAX DECLARATION TAXABLE YEAR TAX DUE PENALTY TOTAL

E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75

#9476101 for P28,676,480.00

#9476103 for P49,115.006

On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on
the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the
Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a
clarification of OGCC Opinion No. 061.

On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that
Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of
exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real
estate tax.

On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with
prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of
Parañaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and
Buildings. The petition was docketed as CA-G.R. SP No. 66878.

On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day
reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration
and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for
review.7
Meanwhile, in January 2003, the City of Parañaque posted notices of auction sale at the Barangay Halls of
Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public market of Barangay La Huerta; and in the
main lobby of the Parañaque City Hall. The City of Parañaque published the notices in the 3 and 10 January 2003
issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced
the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at
the Legislative Session Hall Building of Parañaque City.

A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-
Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain
respondents — the City of Parañaque, City Mayor of Parañaque, Sangguniang Panglungsod ng Parañaque, City
Treasurer of Parañaque, and the City Assessor of Parañaque ("respondents") — from auctioning the Airport Lands
and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court
ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings.
Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO
only at 1:25 p.m. or three hours after the conclusion of the public auction.

On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.

On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during
the hearing, MIAA, respondent City of Parañaque, and the Solicitor General subsequently submitted their
respective Memoranda.

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA.
However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport
Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport
Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to
public use and public service, the ownership of these properties remains with the State. The Airport Lands and
Buildings are thus inalienable and are not subject to real estate tax by local governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real
estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code
because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the
principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public
property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the
tax creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption
privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government
Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person,
thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of
the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings
are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the
Local Government Code has withdrawn the exemption from real estate tax granted to international airports.
Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now
estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax.

The Issue

This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real
estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Parañaque,
and all proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this
petition become moot.

The Court's Ruling

We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.

1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real
estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt by
its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of
government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real
Property Tax Code enumerating the entities exempt from real estate tax.

There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax.
However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions
of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:

SEC. 2. General Terms Defined. – x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital
stock: x x x. (Emphasis supplied)

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is

not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock
divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter 9provides:

SECTION 10. Capital. — The capital of the Authority to be contributed by the National Government shall
be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00)
Pesos to consist of:

(a) The value of fixed assets including airport facilities, runways and equipment and such other properties,
movable and immovable[,] which may be contributed by the National Government or transferred by it
from any of its agencies, the valuation of which shall be determined jointly with the Department of
Budget and Management and the Commission on Audit on the date of such contribution or transfer after
making due allowances for depreciation and other deductions taking into account the loans and other
liabilities of the Authority at the time of the takeover of the assets and other properties;

(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum
(70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the
National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted into the
equity of the National Government in the Authority. Thereafter, the Government contribution to the
capital of the Authority shall be provided in the General Appropriations Act.

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is divided into shares
and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not
divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a
non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or
officers." A non-stock corporation must have members. Even if we assume that the Government is considered as
the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20%
of its annual gross operating income to the National Treasury. 11 This prevents MIAA from qualifying as a non-stock
corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes.
MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or
controlled corporation. What then is the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with
corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government
"instrumentality" as follows:

SEC. 2. General Terms Defined. –– x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and enjoying operational autonomy, usually through a
charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises
the governmental powers of eminent domain,12 police authority13 and the levying of fees and charges.14 At the
same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers
are not inconsistent with the provisions of this Executive Order."15

Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality
remains part of the National Government machinery although not integrated with the department framework. The
MIAA Charter expressly states that transforming MIAA into a "separate and autonomous body" 16 will make its
operation more "financially viable."17

Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock
corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned
or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority,
the University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise
corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the
Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely
called government corporate entities. However, they are not government-owned or controlled corporations in the
strict sense as understood under the Administrative Code, which is the governing law defining the legal
relationship and status of government entities.

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.(Emphasis and underscoring supplied)

Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which
historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes
taxation as one of the powers of local governments, local governments may only exercise such power "subject to
such guidelines and limitations as the Congress may provide."18

When local governments invoke the power to tax on national government instrumentalities, such power is
construed strictly against local governments. The rule is that a tax is never presumed and there must be clear
language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against
taxation. This rule applies with greater force when local governments seek to tax national government
instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However,
when Congress grants an exemption to a national government instrumentality from local taxation, such exemption
is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v.
Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the
amount of money that has to be handled by government in the course of its operations. For these
reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of
non tax-liability of such agencies.19

There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling
policy requires such transfer of public funds from one government pocket to another.

There is also no reason for local governments to tax national government instrumentalities for rendering essential
public services to inhabitants of local governments. The only exception is when the legislature clearly intended to
tax government instrumentalities for the delivery of essential public services for sound and compelling policy
considerations. There must be express language in the law empowering local governments to tax national
government instrumentalities. Any doubt whether such power exists is resolved against local governments.

Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local
governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner
control the operation of constitutional laws enacted by Congress to carry into execution the
powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power
on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the
United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to seriously burden it in the accomplishment of
them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland,
supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the
inherent power to wield it. 20

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the
Republic of the Philippines. The Civil Code provides:

ARTICLE 419. Property is either of public dominion or of private ownership.

ARTICLE 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)

ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article,
is patrimonial property.

ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads,
canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports"
includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State.
Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and
thus owned by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international
and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the
public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation
by the government of a tollway does not change the character of the road as one for public use. Someone must
pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or
only those among the public who actually use the road through the toll fees they pay upon using the road. The
tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public
roads.

The charging of fees to the public does not determine the character of the property whether it is of public
dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use."
Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under
the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles
that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public
character of the road.

The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the
bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those
among the public who actually use a public facility instead of taxing all the public including those who never use
the particular public facility. A user's tax is more equitable — a principle of taxation mandated in the 1987
Constitution.21

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both
international and domestic air traffic,"22 are properties of public dominion because they are intended for public
use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As
properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has
ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court
already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of
man, thus:

According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises
the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and
public works of general service supported by said towns or provinces."

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in
1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the
defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use
the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over
a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be
the object of a contract, and plazas and streets are outside of this commerce, as was decided by the
supreme court of Spain in its decision of February 12, 1895, which says: "Communal things that cannot be
sold because they are by their very nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the
commerce of man:

xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available
to the public in general. They are outside the commerce of man and cannot be disposed of or even leased
by the municipality to private parties. While in case of war or during an emergency, town plazas may be
occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the
town officials should see to it that the town plazas should ever be kept open to the public and free from
encumbrances or illegal private constructions. 24 (Emphasis supplied)

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the
subject of an auction sale.25

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through
public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is
void for being contrary to public policy. Essential public services will stop if properties of public dominion are
subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and
compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.

Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from public
use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141,
which "remains to this day the existing general law governing the classification and disposition of lands of the
public domain other than timber and mineral lands,"27 provide:

SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the
President may designate by proclamation any tract or tracts of land of the public domain as reservations
for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in
accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the
public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power
sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public
fishponds, working men's village and other improvements for the public benefit.

SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall
be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until
again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis
and underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use,
these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings
are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or
foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains
with the State or the Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to withdraw such public
use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:

SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. — (1) The President
shall have the power to reserve for settlement or public use, and for specific public purposes, any of the
lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall
thereafter remain subject to the specific public purpose indicated until otherwise provided by law or
proclamation;

x x x x. (Emphasis supplied)

There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential
proclamation from public use, they are properties of public dominion, owned by the Republic and outside the
commerce of man.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12,
Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by
the Republic, thus:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government
by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)

In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive
head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign
such deed of conveyance.28

d. Transfer to MIAA was Meant to Implement a Reorganization

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau
of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides:

SECTION 3. Creation of the Manila International Airport Authority. — x x x x

The land where the Airport is presently located as well as the surrounding land area of approximately
six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and
administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other
appropriate government agencies shall undertake an actual survey of the area transferred within one year
from the promulgation of this Executive Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through sale or through any other mode unless
specifically approved by the President of the Philippines. (Emphasis supplied)

SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities,
runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all
assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to
 airport works or air operations, including all equipment which are necessary for the operation of crash fire
and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)

SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation
and Transitory Provisions. — The Manila International Airport including the Manila Domestic Airport as a
division under the Bureau of Air Transportation is hereby abolished.

x x x x.

The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash,
promissory notes or even stock since MIAA is not a stock corporation.

The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings
to MIAA, thus:

WHEREAS, the Manila International Airport as the principal airport of the Philippines for both
international and domestic air traffic, is required to provide standards of airport accommodation and
service comparable with the best airports in the world;

WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to
meet the current and future air traffic and other demands of aviation in Metro Manila;

WHEREAS, a management and organization study has indicated that the objectives of providing high
standards of accommodation and service within the context of a financially viable operation, will best
be achieved by a separate and autonomous body; and

WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the
President of the Philippines is given continuing authority to reorganize the National Government, which
authority includes the creation of new entities, agencies and instrumentalities of the Government[.]
(Emphasis supplied)

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to
transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a
division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the
beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims
any ownership rights over MIAA's assets adverse to the Republic.

The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or
through any other mode unless specifically approved by the President of the Philippines." This only means that
the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the
Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport
Lands and Buildings, MIAA does not own the Airport Lands and Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the
Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who
can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands
and Buildings belong to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the
Republic of the Philippines." Section 234(a) provides:

SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real
property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;
 x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local
governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies
andinstrumentalities x x x." The real properties owned by the Republic are titled either in the name of the
Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative
Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the
national government. Such real properties remain owned by the Republic and continue to be exempt from real
estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or instrumentality even as
the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax
exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its
tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local
Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport
Lands and Buildings, such fact does not make these real properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real
estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to
real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to
ataxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v.
Quezon City, the Court ruled:

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of
the land occupied by the hospital and portions of the hospital used for its patients, whether paying or
non-paying, are exempt from real property taxes.29

3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local
Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides:

SEC. 193. Withdrawal of Tax Exemption Privileges – Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are
hereby withdrawn upon effectivity of this Code. (Emphasis supplied)

The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local
Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate
tax. Thus, the minority declares:

It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions
from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit
proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the
inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.

The term "All persons" encompasses the two classes of persons recognized under our laws, natural and
juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just
whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in
the original)

The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status —
whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be examined in
isolation from Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the
tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local
Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any
kind of tax on national government instrumentalities. Section 133(o) states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities,
and local government units. (Emphasis and underscoring supplied)

By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national
government instrumentalities like the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the
national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the
saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from
real estate tax of real property owned by the Republic.

The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax
by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the
three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states:

x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly
registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational
institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt
entities under Section 193. (Emphasis supplied)

The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code.
This theory will result in gross absurdities. It will make the national government, which itself is a juridical person,
subject to tax by local governments since the national government is not included in the enumeration of exempt
entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real
estate tax, on the national government.

Under the minority's theory, many national government instrumentalities with juridical personalities will also be
subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities
vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research
Institute,31Laguna Lake

Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development

Authority, Philippine Ports Authority, Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port
34 35

Authority,38 and Philippine National Railways.39

The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local
governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities with or without juridical personalities. Where the law
does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from
local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality
under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local
governments from imposing any kind of tax on the national government, its agencies and instrumentalities.

Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this Code."
This means that unless the Local Government Code grants an express authorization, local governments have no
power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local governments
have no power to tax the national government, its agencies and instrumentalities. As an exception to this rule,
local governments may tax the national government, its agencies and instrumentalities only if the Local
Government Code expressly so provides.

The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which
makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a
taxable entity. Section 234(a) of the Local Government Code provides:

SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real
property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.

x x x. (Emphasis supplied)

Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this
exemption is when the government gives the beneficial use of the real property to a taxable entity.

The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies
and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies
only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real
property, although owned by the Republic, is not devoted to public use or public service but devoted to the private
gain of a taxable person.

The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the
later provisions prevail over Section 133. Thus, the minority asserts:

x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of
construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical
person, is subject to real property taxes, the general exemptions attaching to instrumentalities under
Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law.
(Emphasis supplied)

The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193
and 234 on the other. No one has urged that there is such a conflict, much less has any one presenteda persuasive
argument that there is such a conflict. The minority's assumption of an irreconcilable conflict in the statutory
provisions is an egregious error for two reasons.

First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its
subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this Code."
By its own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit
the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds such power
on certain matters, there is no conflict between the grant of power and the withholding of power. The grantee of
the power simply cannot exercise the power on matters withheld from its power.

Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units." Section
133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to
tax. Section 133 states that the taxing powers of local governments "shall not extend to the levy" of any kind of tax
on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power
than this.

Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133
logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and
purpose, the "common limitations" on the taxing power prevail over the grant or exercise of the taxing power. If
the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section
133, then local governments can impose any kind of tax on the national government, its agencies and
instrumentalities — a gross absurdity.
Local governments have no power to tax the national government, its agencies and instrumentalities, except as
otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless
otherwise provided in this Code." This exception — which is an exception to the exemption of the Republic from
real estate tax imposed by local governments — refers to Section 234(a) of the Code. The exception to the
exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the
national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is
given to a taxable entity.

The minority also claims that the definition in the Administrative Code of the phrase "government-owned or
controlled corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of
the Administrative Code admits that its definitions are not controlling when it provides:

SEC. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:

xxxx

The minority then concludes that reliance on the Administrative Code definition is "flawed."

The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute
may require a different meaning than that defined in the Administrative Code. However, this does not
automatically mean that the definition in the Administrative Code does not apply to the Local Government Code.
Section 2 of the Administrative Code clearly states that "unless the specific words x x x of a particular statute shall
require a different meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless there
is specific language in the Local Government Code defining the phrase "government-owned or controlled
corporation" differently from the definition in the Administrative Code, the definition in the Administrative Code
prevails.

The minority does not point to any provision in the Local Government Code defining the phrase "government-
owned or controlled corporation" differently from the definition in the Administrative Code. Indeed, there is none.
The Local Government Code is silent on the definition of the phrase "government-owned or controlled
corporation." The Administrative Code, however, expressly defines the phrase "government-owned or controlled
corporation." The inescapable conclusion is that the Administrative Code definition of the phrase "government-
owned or controlled corporation" applies to the Local Government Code.

The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document the
major structural, functional and procedural principles and rules of governance." Thus, the Administrative Code is
the governing law defining the status and relationship of government departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly provides for a different status and relationship for a specific
government unit or entity, the provisions of the Administrative Code prevail.

The minority also contends that the phrase "government-owned or controlled corporation" should apply only to
corporations organized under the Corporation Code, the general incorporation law, and not to corporations
created by special charters. The minority sees no reason why government corporations with special charters
should have a capital stock. Thus, the minority declares:

I submit that the definition of "government-owned or controlled corporations" under the Administrative
Code refer to those corporations owned by the government or its instrumentalities which are created not
by legislative enactment, but formed and organized under the Corporation Code through registration with
the Securities and Exchange Commission. In short, these are GOCCs without original charters.

xxxx

It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs
whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to
declare dividends or alienate their capital shares.

The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations.
It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does not
distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does
not distinguish, courts should not distinguish.

Second, Congress has created through special charters several government-owned corporations organized as stock
corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines.
The special charter40 of the Land Bank of the Philippines provides:

SECTION 81. Capital. — The authorized capital stock of the Bank shall be nine billion pesos, divided into
seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully
subscribed by the Government, and one hundred and twenty million preferred shares with a par value of
ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and
eighty-three of this Code. (Emphasis supplied)

Likewise, the special charter41 of the Development Bank of the Philippines provides:

SECTION 7. Authorized Capital Stock – Par value. — The capital stock of the Bank shall be Five Billion Pesos
to be divided into Fifty Million common shares with par value of P100 per share. These shares are
available for subscription by the National Government. Upon the effectivity of this Charter, the National
Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five
Hundred Million which shall be deemed paid for by the Government with the net asset values of the Bank
remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)

Other government-owned corporations organized as stock corporations under their special charters are the
Philippine Crop Insurance Corporation,42 Philippine International Trading Corporation,43 and the Philippine
National Bank44 before it was reorganized as a stock corporation under the Corporation Code. All these
government-owned corporations organized under special charters as stock corporations are subject to real estate
tax on real properties owned by them. To rule that they are not government-owned or controlled corporations
because they are not registered with the Securities and Exchange Commission would remove them from the reach
of Section 234 of the Local Government Code, thus exempting them from real estate tax.

Third, the government-owned or controlled corporations created through special charters are those that meet the
two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-
owned or controlled corporation must be established for the common good. The second condition is that the
government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of
the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability. (Emphasis and underscoring supplied)

The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations"
through special charters only if these entities are required to meet the twin conditions of common good and
economic viability. In other words, Congress has no power to create government-owned or controlled corporations
with special charters unless they are made to comply with the two conditions of common good and economic
viability. The test of economic viability applies only to government-owned or controlled corporations that perform
economic or commercial activities and need to compete in the market place. Being essentially economic vehicles
of the State for the common good — meaning for economic development purposes — these government-owned
or controlled corporations with special charters are usually organized as stock corporations just like ordinary
private corporations.

In contrast, government instrumentalities vested with corporate powers and performing governmental or public
functions need not meet the test of economic viability. These instrumentalities perform essential public services
for the common good, services that every modern State must provide its citizens. These instrumentalities need not
be economically viable since the government may even subsidize their entire operations. These instrumentalities
are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested
with corporate powers but performing essential governmental or public functions. Congress has plenary authority
to create government instrumentalities vested with corporate powers provided these instrumentalities perform
essential government functions or public services. However, when the legislature creates through special charters
corporations that perform economic or commercial activities, such entities — known as "government-owned or
controlled corporations" — must meet the test of economic viability because they compete in the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar
government-owned or controlled corporations, which derive their income to meet operating expenses solely from
commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the
creation of government-owned or controlled corporations that cannot survive on their own in the market place
and thus merely drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation loses, then it makes its
claim upon the taxpayers' money through new equity infusions from the government and what is always
invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the
entire government, about P28 billion of this will go into equity infusions to support a few government
financial institutions. And this is all taxpayers' money which could have been relocated to agrarian reform,
to social services like health and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this
becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST,"
together with the common good.45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987
Constitution of the Republic of the Philippines: A Commentary:

The second sentence was added by the 1986 Constitutional Commission. The significant addition,
however, is the phrase "in the interest of the common good and subject to the test of economic viability."
The addition includes the ideas that they must show capacity to function efficiently in business and that
they should not go into activities which the private sector can do better. Moreover, economic viability is
more than financial viability but also includes capability to make profit and generate benefits not
quantifiable in financial terms.46 (Emphasis supplied)

Clearly, the test of economic viability does not apply to government entities vested with corporate powers and
performing essential public services. The State is obligated to render essential public services regardless of the
economic viability of providing such service. The non-economic viability of rendering such essential public service
does not excuse the State from withholding such essential services from the public.

However, government-owned or controlled corporations with special charters, organized essentially for economic
or commercial objectives, must meet the test of economic viability. These are the government-owned or
controlled corporations that are usually organized under their special charters as stock corporations, like the Land
Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or
controlled corporations, along with government-owned or controlled corporations organized under the
Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section
2(10) of the Administrative Code.

The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in
the market place. MIAA does not compete in the market place because there is no competing international airport
operated by the private sector. MIAA performs an essential public service as the primary domestic and
international airport of the Philippines. The operation of an international airport requires the presence of
personnel from the following government agencies:

1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers,
screening out those without visas or travel documents, or those with hold departure orders;

2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;

3. The quarantine office of the Department of Health, to enforce health measures against the spread of
infectious diseases into the country;

4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases
into the country;

5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and
the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure;

6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to
enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and

7. The MIAA, to provide the proper premises — such as runway and buildings — for the government
personnel, passengers, and airlines, and to manage the airport operations.

All these agencies of government perform government functions essential to the operation of an international
airport.

MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its
revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal
fees that MIAA charges every passenger are regulatory or administrative fees 47 and not income from commercial
transactions.

MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions
of the Administrative Code, which provides:

SEC. 2. General Terms Defined. – x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and enjoying operational autonomy, usually through a
charter. x x x (Emphasis supplied)

The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or
controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality
under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA
renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is outside the
scope of the phrase "government-owned or controlled corporations" under Section 16, Article XII of the 1987
Constitution.

The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled
corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or controlled corporations." The Administrative Code defines
what constitutes a "government-owned or controlled corporation." To belittle this phrase as "clarificatory or
illustrative" is grave error.

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory
Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is
MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution
because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested
with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory
Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by
local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section
234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of
public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by
the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)

The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of
MIAA are intended for public use, and at the very least intended for public service. Whether intended for public
use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under
Section 234(a) of the Local Government Code.

4. Conclusion

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal
relation and status of government units, agencies and offices within the entire government machinery, MIAA is a
government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the
Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to
"[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real
property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the
specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and
Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Parañaque.

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are
properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate
tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of
public dominion are not subject to execution or foreclosure sale.

WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October
2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila
International Airport Authority EXEMPT from the real estate tax imposed by the City of Parañaque. We
declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued
by the City of Parañaque on the Airport Lands and Buildings of the Manila International Airport Authority, except
for the portions that the Manila International Airport Authority has leased to private parties. We also
declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila
International Airport Authority.

No costs.

SO ORDERED.

Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio

Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., J.J., concur.
x-------------------------------------------------------------------------------x

DISSENTING OPINION

TINGA, J. :

The legally correct resolution of this petition would have had the added benefit of an utterly fair and equitable
result – a recognition of the constitutional and statutory power of the City of Parañaque to impose real property
taxes on the Manila International Airport Authority (MIAA), but at the same time, upholding a statutory limitation
that prevents the City of Parañaque from seizing and conducting an execution sale over the real properties of
MIAA. In the end, all that the City of Parañaque would hold over the MIAA is a limited lien, unenforceable as it is
through the sale or disposition of MIAA properties. Not only is this the legal effect of all the relevant constitutional
and statutory provisions applied to this case, it also leaves the room for negotiation for a mutually acceptable
resolution between the City of Parañaque and MIAA.

Instead, with blind but measured rage, the majority today veers wildly off-course, shattering statutes and judicial
precedents left and right in order to protect the precious Ming vase that is the Manila International Airport
Authority (MIAA). While the MIAA is left unscathed, it is surrounded by the wreckage that once was the
constitutional policy, duly enacted into law, that was local autonomy. Make no mistake, the majority has virtually
declared war on the seventy nine (79) provinces, one hundred seventeen (117) cities, and one thousand five
hundred (1,500) municipalities of the Philippines. 1

The icing on this inedible cake is the strained and purposely vague rationale used to justify the majority opinion.
Decisions of the Supreme Court are expected to provide clarity to the parties and to students of jurisprudence, as
to what the law of the case is, especially when the doctrines of long standing are modified or clarified. With all due
respect, the decision in this case is plainly so, so wrong on many levels. More egregious, in the majority's resolve to
spare the Manila International Airport Authority (MIAA) from liability for real estate taxes, no clear-cut rule
emerges on the important question of the power of local government units (LGUs) to tax government
corporations, instrumentalities or agencies.

The majority would overturn sub silencio, among others, at least one dozen precedents enumerated below:

1) Mactan-Cebu International Airport Authority v. Hon. Marcos, 2 the leading case penned in 1997 by recently
retired Chief Justice Davide, which held that the express withdrawal by the Local Government Code of previously
granted exemptions from realty taxes applied to instrumentalities and government-owned or controlled
corporations (GOCCs) such as the Mactan-Cebu International Airport Authority (MCIAA). The majority invokes the
ruling in Basco v. Pagcor,3 a precedent discredited in Mactan, and a vanguard of a doctrine so noxious to the
concept of local government rule that the Local Government Code was drafted precisely to counter such
philosophy. The efficacy of several rulings that expressly rely on Mactan, such as PHILRECA v. DILG Secretary, 4City
Government of San Pablo v. Hon. Reyes5 is now put in question.

2) The rulings in National Power Corporation v. City of Cabanatuan, 6 wherein the Court, through Justice Puno,
declared that the National Power Corporation, a GOCC, is liable for franchise taxes under the Local Government
Code, and succeeding cases that have relied on it such as Batangas Power Corp. v. Batangas City 7 The majority now
states that deems instrumentalities as defined under the Administrative Code of 1987 as purportedly beyond the
reach of any form of taxation by LGUs, stating "[l]ocal governments are devoid of power to tax the national
government, its agencies and instrumentalities."8 Unfortunately, using the definition employed by the majority, as
provided by Section 2(d) of the Administrative Code, GOCCs are also considered as instrumentalities, thus leading
to the astounding conclusion that GOCCs may not be taxed by LGUs under the Local Government Code.

3) Lung Center of the Philippines v. Quezon City,9 wherein a unanimous en banc Court held that the Lung Center of
the Philippines may be liable for real property taxes. Using the majority's reasoning, the Lung Center would be
properly classified as an instrumentality which the majority now holds as exempt from all forms of local taxation. 10
4) City of Davao v. RTC,11 where the Court held that the Government Service Insurance System (GSIS) was liable for
real property taxes for the years 1992 to 1994, its previous exemption having been withdrawn by the enactment of
the Local Government Code.12 This decision, which expressly relied on Mactan, would be directly though silently
overruled by the majority.

5) The common essence of the Court's rulings in the two Philippine Ports Authority v. City of Iloilo, 13 cases penned
by Justices Callejo and Azcuna respectively, which relied in part on Mactan in holding the Philippine Ports Authority
(PPA) liable for realty taxes, notwithstanding the fact that it is a GOCC. Based on the reasoning of the majority, the
PPA cannot be considered a GOCC. The reliance of these cases on Mactan, and its rationale for holding
governmental entities like the PPA liable for local government taxation is mooted by the majority.

6) The 1963 precedent of Social Security System Employees Association v. Soriano, 14 which declared the Social
Security Commission (SSC) as a GOCC performing proprietary functions. Based on the rationale employed by the
majority, the Social Security System is not a GOCC. Or perhaps more accurately, "no longer" a GOCC.

7) The decision penned by Justice (now Chief Justice) Panganiban, Light Rail Transit Authority v. Central Board of
Assessment.15 The characterization therein of the Light Rail Transit Authority (LRTA) as a "service-oriented
commercial endeavor" whose patrimonial property is subject to local taxation is now rendered inconsequential,
owing to the majority's thinking that an entity such as the LRTA is itself exempt from local government taxation 16,
irrespective of the functions it performs. Moreover, based on the majority's criteria, LRTA is not a GOCC.

8) The cases of Teodoro v. National Airports Corporation 17 and Civil Aeronautics Administration v. Court of
Appeals.18 wherein the Court held that the predecessor agency of the MIAA, which was similarly engaged in the
operation, administration and management of the Manila International Agency, was engaged in the exercise of
proprietary, as opposed to sovereign functions. The majority would hold otherwise that the property maintained
by MIAA is actually patrimonial, thus implying that MIAA is actually engaged in sovereign functions.

9) My own majority in Phividec Industrial Authority v. Capitol Steel, 19 wherein the Court held that the Phividec
Industrial Authority, a GOCC, was required to secure the services of the Office of the Government Corporate
Counsel for legal representation.20 Based on the reasoning of the majority, Phividec would not be a GOCC, and the
mandate of the Office of the Government Corporate Counsel extends only to GOCCs.

10) Two decisions promulgated by the Court just last month (June 2006), National Power Corporation v. Province
of Isabela21 and GSIS v. City Assessor of Iloilo City.22 In the former, the Court pronounced that "[a]lthough as a
general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National Government, its agencies and
instrumentalities, this rule admits of an exception, i.e., when specific provisions of the LGC authorize the LGUs to
impose taxes, fees or charges on the aforementioned entities." Yet the majority now rules that the exceptions in
the LGC no longer hold, since "local governments are devoid of power to tax the national government, its agencies
and instrumentalities."23 The ruling in the latter case, which held the GSIS as liable for real property taxes, is now
put in jeopardy by the majority's ruling.

There are certainly many other precedents affected, perhaps all previous jurisprudence regarding local
government taxation vis-a-vis government entities, as well as any previous definitions of GOCCs, and previous
distinctions between the exercise of governmental and proprietary functions (a distinction laid down by this Court
as far back as 191624). What is the reason offered by the majority for overturning or modifying all these precedents
and doctrines? None is given, for the majority takes comfort instead in the pretense that these precedents never
existed. Only children should be permitted to subscribe to the theory that something bad will go away if you
pretend hard enough that it does not exist.

I.

Case Should Have Been Decided

Following Mactan Precedent

The core issue in this case, whether the MIAA is liable to the City of Parañaque for real property taxes under the
Local Government Code, has already been decided by this Court in the Mactan case, and should have been
resolved by simply applying precedent.
Mactan Explained

A brief recall of the Mactan case is in order. The Mactan-Cebu International Airport Authority (MCIAA) claimed that
it was exempt from payment of real property taxes to the City of Cebu, invoking the specific exemption granted in
Section 14 of its charter, Republic Act No. 6958, and its status as an instrumentality of the government performing
governmental functions.25 Particularly, MCIAA invoked Section 133 of the Local Government Code, precisely the
same provision utilized by the majority as the basis for MIAA's exemption. Section 133 reads:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units.— Unless otherwise provided
herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the
levy of the following:

xxx

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local
government units. (emphasis and underscoring supplied).

However, the Court in Mactan noted that Section 133 qualified the exemption of the National Government, its
agencies and instrumentalities from local taxation with the phrase "unless otherwise provided herein." It then
considered the other relevant provisions of the Local Government Code, particularly the following:

SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemption or
incentives granted to, or enjoyed by all persons, whether natural or juridical, including government-owned and
controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.26

SECTION 232. Power to Levy Real Property Tax. – A province or city or a municipality within the Metropolitan
Manila area may levy an annual ad valorem tax on real property such as land, building, machinery, and other
improvements not hereafter specifically exempted.27

SECTION 234. Exemptions from Real Property Tax. -- The following are exempted from payment of the real
property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person:

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious
cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious
charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and
government-owned and controlled corporations engaged in the distribution of water and/or generation and
transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations
are hereby withdrawn upon the effectivity of this Code.28

Clearly, Section 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National
Government, its agencies and instrumentalities, as evidenced by these cited provisions which "otherwise
provided." But what was the extent of the limitation under Section 133? This is how the Court, correctly to my
mind, defined the parameters in Mactan:
The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and
the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of
exceptions or provisos in these sections, as shown by the following clauses:

(1) "unless otherwise provided herein" in the opening paragraph of Section 133;

(2) "Unless otherwise provided in this Code" in Section 193;

(3) "not hereafter specifically exempted" in Section 232; and

(4) "Except as provided herein" in the last paragraph of Section 234

initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in Section 133
seems to be inaccurately worded. Instead of the clause "unless otherwise provided herein," with the "herein" to
mean, of course, the section, it should have used the clause "unless otherwise provided in this Code." The former
results in absurdity since the section itself enumerates what are beyond the taxing powers of local government
units and, where exceptions were intended, the exceptions are explicitly indicated in the next. For instance, in item
(a) which excepts income taxes "when levied on banks and other financial institutions"; item (d) which excepts
"wharfage on wharves constructed and maintained by the local government unit concerned"; and item (1) which
excepts taxes, fees and charges for the registration and issuance of licenses or permits for the driving of "tricycles."
It may also be observed that within the body itself of the section, there are exceptions which can be found only in
other parts of the LGC, but the section interchangeably uses therein the clause, "except as otherwise provided
herein" as in items (c) and (i), or the clause "except as provided in this Code" in item (j). These clauses would be
obviously unnecessary or mere surplusages if the opening clause of the section were "Unless otherwise provided in
this Code" instead of "Unless otherwise provided herein." In any event, even if the latter is used, since under
Section 232 local government units have the power to levy real property tax, except those exempted therefrom
under Section 234, then Section 232 must be deemed to qualify Section 133.

Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in
Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and
charges of any kind on the National Government, its agencies and instrumentalities, and local government units";
however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may
impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of
its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise,
to a taxable person," as provided in item (a) of the first paragraph of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial persons, including
government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are
withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless
otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties
exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the
exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated
therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover,
even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by
item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has
been granted to a taxable person for consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from
payment of real property taxes granted to natural or juridical persons, including government-owned or controlled
corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No.
6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under
any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above,
the said section is qualified by Sections 232 and 234.29

The Court in Mactan acknowledged that under Section 133, instrumentalities were generally exempt from all
forms of local government taxation, unless otherwise provided in the Code. On the other hand, Section 232
"otherwise provided" insofar as it allowed LGUs to levy an ad valorem real property tax, irrespective of who owned
the property. At the same time, the imposition of real property taxes under Section 232 is in turn qualified by the
phrase "not hereinafter specifically exempted." The exemptions from real property taxes are enumerated in
Section 234, which specifically states that only real properties owned "by the Republic of the Philippines or any of
its political subdivisions" are exempted from the payment of the tax. Clearly, instrumentalities or GOCCs do not fall
within the exceptions under Section 234. 30

Mactan Overturned the

Precedents Now Relied

Upon by the Majority

But the petitioners in Mactan also raised the Court's ruling in Basco v. PAGCOR, 31 decided before the enactment of
the Local Government Code. The Court in Basco declared the PAGCOR as exempt from local taxes, justifying the
exemption in this wise:

Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government
owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the
National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises regulatory
powers xxx

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places
it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government,
PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded
or subjected to control by a mere Local government.

"The states have no power by taxation or otherwise, to retard impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal
government." (McCulloch v. Marland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of
the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland,
254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such
a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the
accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities
may perceive to be undesirable activates or enterprise using the power to tax as "a tool for regulation" (U.S. v.
Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. Maryland, supra)
cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to
wield it.32

Basco is as strident a reiteration of the old guard view that frowned on the principle of local autonomy, especially
as it interfered with the prerogatives and privileges of the national government. Also consider the following
citation from Maceda v. Macaraig,33 decided the same year as Basco. Discussing the rule of construction of tax
exemptions on government instrumentalities, the sentiments are of a similar vein.

Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case of exemptions
in favor of a government political subdivision or instrumentality.

The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions,
even more obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize
differential treatment and foster impartiality, fairness, and equality of treatment among tax payers.
The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or
its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to
be handled by government in the course of its operations. For these reasons, provisions granting exemptions to
government agencies may be construed liberally, in favor of non tax-liability of such agencies.

In the case of property owned by the state or a city or other public corporations, the express exemption should not
be construed with the same degree of strictness that applies to exemptions contrary to the policy of the state,
since as to such property "exemption is the rule and taxation the exception." 34

Strikingly, the majority cites these two very cases and the stodgy rationale provided therein. This evinces the
perspective from which the majority is coming from. It is admittedly a viewpoint once shared by this Court, and en
vogue prior to the enactment of the Local Government Code of 1991.

However, the Local Government Code of 1991 ushered in a new ethos on how the art of governance should be
practiced in the Philippines, conceding greater powers once held in the private reserve of the national government
to LGUs. The majority might have private qualms about the wisdom of the policy of local autonomy, but the
members of the Court are not expected to substitute their personal biases for the legislative will, especially when
the 1987 Constitution itself promotes the principle of local autonomy.

Article II. Declaration of Principles and State Policies

xxx

Sec. 25. The State shall ensure the autonomy of local governments.

Article X. Local Government

xxx

Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.

Section 3. The Congress shall enact a local government code which shall provide for a more responsive and
accountable local government structure instituted through a system of decentralization with effective mechanisms
of recall, initiative, and referendum, allocate among the different local government units their powers,
responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and all other matters relating to the organization and
operation of the local units.

xxx

Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic
policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

xxx

The Court in Mactan recognized that a new day had dawned with the enactment of the 1987 Constitution and the
Local Government Code of 1991. Thus, it expressly rejected the contention of the MCIAA that Basco was applicable
to them. In doing so, the language of the Court was dramatic, if only to emphasize how monumental the shift in
philosophy was with the enactment of the Local Government Code:

Accordingly, the position taken by the [MCIAA] is untenable. Reliance on Basco v. Philippine Amusement and
Gaming Corporation is unavailing since it was decided before the effectivity of the [Local Government Code].
Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Government
performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional
mandate and national policy, no one can doubt its wisdom. 35 (emphasis supplied)

The Court Has Repeatedly

Reaffirmed Mactan Over the

Precedents Now Relied Upon

By the Majority

Since then and until today, the Court has been emphatic in declaring the Basco doctrine as dead. The notion that
instrumentalities may be subjected to local taxation by LGUs was again affirmed in National Power Corporation v.
City of Cabanatuan,36 which was penned by Justice Puno. NPC or Napocor, invoking its continued exemption from
payment of franchise taxes to the City of Cabanatuan, alleged that it was an instrumentality of the National
Government which could not be taxed by a city government. To that end, Basco was cited by NPC. The Court had
this to say about Basco.

xxx[T]he doctrine in Basco vs. Philippine Amusement and Gaming Corporation relied upon by the petitioner to
support its claim no longer applies. To emphasize, the Basco case was decided prior to the effectivity of the LGC,
when no law empowering the local government units to tax instrumentalities of the National Government was in
effect. However, as this Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs.
Marcos, nothing prevents Congress from decreeing that even instrumentalities or agencies of the government
performing governmental functions may be subject to tax. In enacting the LGC, Congress exercised its prerogative
to tax instrumentalities and agencies of government as it sees fit. Thus, after reviewing the specific provisions of
the LGC, this Court held that MCIAA, although an instrumentality of the national government, was subject to real
property tax.37

In the 2003 case of Philippine Ports Authority v. City of Iloilo, 38 the Court, in the able ponencia of Justice Azcuna,
affirmed the levy of realty taxes on the PPA. Although the taxes were assessed under the old Real Property Tax
Code and not the Local Government Code, the Court again cited Mactan to refute PPA's invocation of Basco as the
basis of its exemption.

[Basco] did not absolutely prohibit local governments from taxing government instrumentalities. In fact we stated
therein:

The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may
provide by law. Since P.D. 1869 remains an "operative" law until "amended, repealed or revoked". . . its
"exemption clause" remains an exemption to the exercise of the power of local governments to impose taxes and
fees.

Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos, where the Basco
case was similarly invoked for tax exemption, we stated: "[N]othing can prevent Congress from decreeing that
even instrumentalities or agencies of the Government performing governmental functions may be subject to tax.
Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom."
The fact that tax exemptions of government-owned or controlled corporations have been expressly withdrawn by
the present Local Government Code clearly attests against petitioner's claim of absolute exemption of government
instrumentalities from local taxation.39

Just last month, the Court in National Power Corporation v. Province of Isabela 40 again rejected Basco in emphatic
terms. Held the Court, through Justice Callejo, Sr.:

Thus, the doctrine laid down in the Basco case is no longer true. In the Cabanatuan case, the Court noted primarily
that the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government
units to tax instrumentalities of the National Government was in effect. It further explained that in enacting the
LGC, Congress empowered the LGUs to impose certain taxes even on instrumentalities of the National
Government.41

The taxability of the PPA recently came to fore in Philippine Ports Authority v. City of Iloilo42 case, a decision also
penned by Justice Callejo, Sr., wherein the Court affirmed the sale of PPA's properties at public auction for failure
to pay realty taxes. The Court again reiterated that "it was the intention of Congress to withdraw the tax
exemptions granted to or presently enjoyed by all persons, including government-owned or controlled
corporations, upon the effectivity" of the Code.43 The Court in the second Public Ports Authority case likewise cited
Mactan as providing the "raison d'etre for the withdrawal of the exemption," namely, "the State policy to ensure
autonomy to local governments and the objective of the [Local Government Code] that they enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development as self-reliant communities. . . . "44

Last year, the Court, in City of Davao v. RTC, 45 affirmed that the legislated exemption from real property taxes of
the Government Service Insurance System (GSIS) was removed under the Local Government Code. Again, Mactan
was relied upon as the governing precedent. The removal of the tax exemption stood even though the then GSIS
law46 prohibited the removal of GSIS' tax exemptions unless the exemption was specifically repealed, "and a
provision is enacted to substitute the declared policy of exemption from any and all taxes as an essential factor for
the solvency of the fund."47 The Court, citing established doctrines in statutory construction and Duarte v.
Dade48 ruled that such proscription on future legislation was itself prohibited, as "the legislature cannot bind a
future legislature to a particular mode of repeal."49

And most recently, just less than one month ago, the Court, through Justice Corona in Government Service
Insurance System v. City Assessor of Iloilo50 again affirmed that the Local Government Code removed the previous
exemption from real property taxes of the GSIS. Again Mactan was cited as having "expressly withdrawn the [tax]
exemption of the [GOCC].51

Clearly then, Mactan is not a stray or unique precedent, but the basis of a jurisprudential rule employed by the
Court since its adoption, the doctrine therein consistent with the Local Government Code. Corollarily, Basco, the
polar opposite of Mactan has been emphatically rejected and declared inconsistent with the Local Government
Code.

II.

Majority, in Effectively Overturning Mactan,

Refuses to Say Why Mactan Is Wrong

The majority cites Basco in support. It does not cite Mactan, other than an incidental reference that it is relied
upon by the respondents.52 However, the ineluctable conclusion is that the majority rejects the rationale and
ruling in Mactan. The majority provides for a wildly different interpretation of Section 133, 193 and 234 of the
Local Government Code than that employed by the Court in Mactan. Moreover, the parties in Mactan and in this
case are similarly situated, as can be obviously deducted from the fact that both petitioners are airport authorities
operating under similarly worded charters. And the fact that the majority cites doctrines contrapuntal to the Local
Government Code as in Basco and Maceda evinces an intent to go against the Court's jurisprudential trend
adopting the philosophy of expanded local government rule under the Local Government Code.

Before I dwell upon the numerous flaws of the majority, a brief comment is necessitated on the majority's studied
murkiness vis-à-vis the Mactan precedent. The majority is obviously inconsistent with Mactan and there is no way
these two rulings can stand together. Following basic principles in statutory construction, Mactan will be deemed
as giving way to this new ruling.

However, the majority does not bother to explain why Mactan is wrong. The interpretation in Mactan of the
relevant provisions of the Local Government Code is elegant and rational, yet the majority refuses to explain why
this reasoning of the Court in Mactan is erroneous. In fact, the majority does not even engage Mactan in any
meaningful way. If the majority believes that Mactan may still stand despite this ruling, it remains silent as to the
viable distinctions between these two cases.

The majority's silence on Mactan is baffling, considering how different this new ruling is with the ostensible
precedent. Perhaps the majority does not simply know how to dispense with the ruling in Mactan. If Mactan truly
deserves to be discarded as precedent, it deserves a more honorable end than death by amnesia or ignonominous
disregard. The majority could have devoted its discussion in explaining why it thinks Mactan is wrong, instead of
pretending that Mactan never existed at all. Such an approach might not have won the votes of the minority, but
at least it would provide some degree of intellectual clarity for the parties, LGUs and the national government,
students of jurisprudence and practitioners. A more meaningful debate on the matter would have been possible,
enriching the study of law and the intellectual dynamic of this Court.

There is no way the majority can be justified unless Mactan is overturned. The MCIAA and the MIAA are similarly
situated. They are both, as will be demonstrated, GOCCs, commonly engaged in the business of operating an
airport. They are the owners of airport properties they respectively maintain and hold title over these properties in
their name.53 These entities are both owned by the State, and denied by their respective charters the absolute
right to dispose of their properties without prior approval elsewhere. 54 Both of them are

not empowered to obtain loans or encumber their properties without prior approval the prior approval of the
President.55

III.

Instrumentalities, Agencies

And GOCCs Generally

Liable for Real Property Tax

I shall now proceed to demonstrate the errors in reasoning of the majority. A bulwark of my position lies with
Mactan, which will further demonstrate why the majority has found it inconvenient to even grapple with the
precedent that is Mactan in the first place.

Mactan held that the prohibition on taxing the national government, its agencies and instrumentalities under
Section 133 is qualified by Section 232 and Section 234, and accordingly, the only relevant exemption now
applicable to these bodies is as provided under Section 234(o), or on "real property owned by the Republic of the
Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person."

It should be noted that the express withdrawal of previously granted exemptions by the Local Government Code
do not even make any distinction as to whether the exempt person is a governmental entity or not. As Sections
193 and 234 both state, the withdrawal applies to "all persons, including [GOCCs]", thus encompassing the two
classes of persons recognized under our laws, natural persons56 and juridical persons.57

The fact that the Local Government Code mandates the withdrawal of previously granted exemptions evinces
certain key points. If an entity was previously granted an express exemption from real property taxes in the first
place, the obvious conclusion would be that such entity would ordinarily be liable for such taxes without the
exemption. If such entities were already deemed exempt due to some overarching principle of law, then it would
be a redundancy or surplusage to grant an exemption to an already exempt entity. This fact militates against the
claim that MIAA is preternaturally exempt from realty taxes, since it required the enactment of an express
exemption from such taxes in its charter.

Amazingly, the majority all but ignores the disquisition in Mactan and asserts that government instrumentalities
are not taxable persons unless they lease their properties to a taxable person. The general rule laid down in
Section 232 is given short shrift. In arriving at this conclusion, several leaps in reasoning are committed.

Majority's Flawed Definition

of GOCCs.

The majority takes pains to assert that the MIAA is not a GOCC, but rather an instrumentality. However, and quite
grievously, the supposed foundation of this assertion is an adulteration.

The majority gives the impression that a government instrumentality is a distinct concept from a government
corporation.58 Most tellingly, the majority selectively cites a portion of Section 2(10) of the Administrative Code of
1987, as follows:

Instrumentality refers to any agency of the National Government not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. xxx 59 (emphasis
omitted)
However, Section 2(10) of the Administrative Code, when read in full, makes an important clarification which the
majority does not show. The portions omitted by the majority are highlighted below:

(10)Instrumentality refers to any agency of the National Government not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government—owned or controlled corporations.60

Since Section 2(10) makes reference to "agency of the National Government," Section 2(4) is also worth citing in
full:

(4) Agency of the Government refers to any of the various units of the Government, including a department,
bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a
distinct unit therein. (emphasis supplied) 61

Clearly then, based on the Administrative Code, a GOCC may be an instrumentality or an agency of the National
Government. Thus, there actually is no point in the majority's assertion that MIAA is not a GOCC, since based on
the majority's premise of Section 133 as the key provision, the material question is whether MIAA is either an
instrumentality, an agency, or the National Government itself. The very provisions of the Administrative Code
provide that a GOCC can be either an instrumentality or an agency, so why even bother to extensively discuss
whether or not MIAA is a GOCC?

Indeed as far back as the 1927 case of Government of the Philippine Islands v. Springer, 62 the Supreme Court
already noted that a corporation of which the government is the majority stockholder "remains an agency or
instrumentality of government."63

Ordinarily, the inconsequential verbiage stewing in judicial opinions deserve little rebuttal. However, the entire
discussion of the majority on the definition of a GOCC, obiter as it may ultimately be, deserves emphatic
refutation. The views of the majority on this matter are very dangerous, and would lead to absurdities, perhaps
unforeseen by the majority. For in fact, the majority effectively declassifies many entities created and recognized
as GOCCs and would give primacy to the Administrative Code of 1987 rather than their respective charters as to
the definition of these entities.

Majority Ignores the Power

Of Congress to Legislate and

Define Chartered Corporations

First, the majority declares that, citing Section 2(13) of the Administrative Code, a GOCC must be "organized as a
stock or non-stock corporation," as defined under the Corporation Code. To insist on this as an absolute rule fails
on bare theory. Congress has the undeniable power to create a corporation by legislative charter, and has been
doing so throughout legislative history. There is no constitutional prohibition on Congress as to what structure
these chartered corporations should take on. Clearly, Congress has the prerogative to create a corporation in
whatever form it chooses, and it is not bound by any traditional format. Even if there is a definition of what a
corporation is under the Corporation Code or the Administrative Code, these laws are by no means sacrosanct. It
should be remembered that these two statutes fall within the same level of hierarchy as a congressional charter,
since they all are legislative enactments. Certainly, Congress can choose to disregard either the Corporation Code
or the Administrative Code in defining the corporate structure of a GOCC, utilizing the same extent of legislative
powers similarly vesting it the putative ability to amend or abolish the Corporation Code or the Administrative
Code.

These principles are actually recognized by both the Administrative Code and the Corporation Code. The definition
of GOCCs, agencies and instrumentalities under the Administrative Code are laid down in the section entitled
"General Terms Defined," which qualifies:

Sec. 2. General Terms Defined. – Unless the specific words of the text, or the context as a whole, or a particular
statute, shall require a different meaning: (emphasis supplied)
xxx

Similar in vein is Section 6 of the Corporation Code which provides:

SEC. 4. Corporations created by special laws or charters.— Corporations created by special laws or charters shall be
governed primarily by the provisions of the special law or charter creating them or applicable to them,
supplemented by the provisions of this Code, insofar as they are applicable. (emphasis supplied)

Thus, the clear doctrine emerges – the law that governs the definition of a corporation or entity created by
Congress is its legislative charter. If the legislative enactment defines an entity as a corporation, then it is a
corporation, no matter if the Corporation Code or the Administrative Code seemingly provides otherwise. In case
of conflict between the legislative charter of a government corporation, on one hand, and the Corporate Code and
the Administrative Code, on the other, the former always prevails.

Majority, in Ignoring the

Legislative Charters, Effectively

Classifies Duly Established GOCCs,

With Disastrous and Far Reaching

Legal Consequences

Second, the majority claims that MIAA does not qualify either as a stock or non-stock corporation, as defined
under the Corporation Code. It explains that the MIAA is not a stock corporation because it does not have any
capital stock divided into shares. Neither can it be considered as a non-stock corporation because it has no
members, and under Section 87, a non-stock corporation is one where no part of its income is distributable as
dividends to its members, trustees or officers.

This formulation of course ignores Section 4 of the Corporation Code, which again provides that corporations
created by special laws or charters shall be governed primarily by the provisions of the special law or charter, and
not the Corporation Code.

That the MIAA cannot be considered a stock corporation if only because it does not have a stock structure is hardly
a plausible proposition. Indeed, there is no point in requiring a capital stock structure for GOCCs whose full
ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends
or alienate their capital shares.

Admittedly, there are GOCCs established in such a manner, such as the National Power Corporation (NPC), which is
provided with authorized capital stock wholly subscribed and paid for by the Government of the Philippines,
divided into shares but at the same time, is prohibited from transferring, negotiating, pledging, mortgaging or
otherwise giving these shares as security for payment of any obligation.64 However, based on the Corporation
Code definition relied upon by the majority, even the NPC cannot be considered as a stock corporation. Under
Section 3 of the Corporation Code, stock corporations are defined as being "authorized to distribute to the holders
of its shares dividends or allotments of the surplus profits on the basis of the shares held." 65 On the other hand,
Section 13 of the NPC's charter states that "the Corporation shall be non-profit and shall devote all its returns from
its capital investment, as well as excess revenues from its operation, for expansion." 66 Can the holder of the shares
of NPC, the National Government, receive its surplus profits on the basis of its shares held? It cannot, according to
the NPC charter, and hence, following Section 3 of the Corporation Code, the NPC is not a stock corporation, if the
majority is to be believed.

The majority likewise claims that corporations without members cannot be deemed non-stock corporations. This
would seemingly exclude entities such as the NPC, which like MIAA, has no ostensible members. Moreover, non-
stock corporations cannot distribute any part of its income as dividends to its members, trustees or officers. The
majority faults MIAA for remitting 20% of its gross operating income to the national government. How about the
Philippine Health Insurance Corporation, created with the "status of a tax-exempt government corporation
attached to the Department of Health" under Rep. Act No. 7875.67 It too cannot be considered as a stock
corporation because it has no capital stock structure. But using the criteria of the majority, it is doubtful if it would
pass muster as a non-stock corporation, since the PHIC or Philhealth, as it is commonly known, is expressly
empowered "to collect, deposit, invest, administer and disburse" the National Health Insurance Fund.68 Or how
about the Social Security System, which under its revised charter, Republic Act No. 8282, is denominated as a
"corporate body."69 The SSS has no capital stock structure, but has capital comprised of contributions by its
members, which are eventually remitted back to its members. Does this disqualify the SSS from classification as a
GOCC, notwithstanding this Court's previous pronouncement in Social Security System Employees Association v.
Soriano?70

In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs, whether stock or non-stock,71 declare and
remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National
Government.72 But according to the majority, non-stock corporations are prohibited from declaring any part of its
income as dividends. But if Republic Act No. 7656 requires even non-stock corporations to declare dividends from
income, should it not follow that the prohibition against declaration of dividends by non-stock corporations under
the Corporation Code does not apply to government-owned or controlled corporations? For if not, and the
majority's illogic is pursued, Republic Act No. 7656, passed in 1993, would be fatally flawed, as it would contravene
the Administrative Code of 1987 and the Corporation Code.

In fact, the ruinous effects of the majority's hypothesis on the nature of GOCCs can be illustrated by Republic Act
No. 7656. Following the majority's definition of a GOCC and in accordance with Republic Act No. 7656, here are but
a few entities which are not obliged to remit fifty (50%) of its annual net earnings to the National Government as
they are excluded from the scope of Republic Act No. 7656:

1) Philippine Ports Authority73 – has no capital stock74, no members, and obliged to apply the balance of its income
or revenue at the end of each year in a general reserve.75

2) Bases Conversion Development Authority76 - has no capital stock,77 no members.

3) Philippine Economic Zone Authority78 - no capital stock,79 no members.

4) Light Rail Transit Authority80 - no capital stock,81 no members.

5) Bangko Sentral ng Pilipinas82 - no capital stock,83 no members, required to remit fifty percent (50%) of its net
profits to the National Treasury.84

6) National Power Corporation85 - has capital stock but is prohibited from "distributing to the holders of its shares
dividends or allotments of the surplus profits on the basis of the shares held;"86 no members.

7) Manila International Airport Authority – no capital stock87, no members88, mandated to remit twenty percent
(20%) of its annual gross operating income to the National Treasury. 89

Thus, for the majority, the MIAA, among many others, cannot be considered as within the coverage of Republic Act
No. 7656. Apparently, President Fidel V. Ramos disagreed. How else then could Executive Order No. 483, signed in
1998 by President Ramos, be explained? The issuance provides:

WHEREAS, Section 1 of Republic Act No. 7656 provides that:

"Section 1. Declaration of Policy. - It is hereby declared the policy of the State that in order for the National
Government to realize additional revenues, government-owned and/or controlled corporations, without impairing
their viability and the purposes for which they have been established, shall share a substantial amount of their net
earnings to the National Government."

WHEREAS, to support the viability and mandate of government-owned and/or controlled corporations [GOCCs],
the liquidity, retained earnings position and medium-term plans and programs of these GOCCs were considered in
the determination of the reasonable dividend rates of such corporations on their 1997 net earnings.
WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance recommended the adjustment on the
percentage of annual net earnings that shall be declared by the Manila International Airport Authority [MIAA] and
Phividec Industrial Authority [PIA] in the interest of national economy and general welfare.

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines, by virtue of the powers vested in me by law, do
hereby order:

SECTION 1. The percentage of net earnings to be declared and remitted by the MIAA and PIA as dividends to the
National Government as provided for under Section 3 of Republic Act No. 7656 is adjusted from at least fifty
percent [50%] to the rates specified hereunder:

1. Manila International Airport Authority - 35% [cash]

2. Phividec Industrial Authority - 25% [cash]

SECTION 2. The adjusted dividend rates provided for under Section 1 are only applicable on 1997 net earnings of
the concerned government-owned and/or controlled corporations.

Obviously, it was the opinion of President Ramos and the Secretary of Finance that MIAA is a GOCC, for how else
could it have come under the coverage of Republic Act No. 7656, a law applicable only to GOCCs? But, the majority
apparently disagrees, and resultantly holds that MIAA is not obliged to remit even the reduced rate of thirty five
percent (35%) of its net earnings to the national government, since it cannot be covered by Republic Act No. 7656.

All this mischief because the majority would declare the Administrative Code of 1987 and the Corporation Code as
the sole sources of law defining what a government corporation is. As I stated earlier, I find it illogical that
chartered corporations are compelled to comply with the templates of the Corporation Code, especially when the
Corporation Code itself states that these corporations are to be governed by their own charters. This is especially
true considering that the very provision cited by the majority, Section 87 of the Corporation Code, expressly says
that the definition provided therein is laid down "for the purposes of this [Corporation] Code." Read in conjunction
with Section 4 of the Corporation Code which mandates that corporations created by charter be governed by the
law creating them, it is clear that contrary to the majority, MIAA is not disqualified from classification as a non-
stock corporation by reason of Section 87, the provision not being applicable to corporations created by special
laws or charters. In fact, I see no real impediment why the MIAA and similarly situated corporations such as the
PHIC, the SSS, the Philippine Deposit Insurance Commission, or maybe even the NPC could at the very least, be
deemed as no stock corporations (as differentiated from non-stock corporations).

The point, stripped to bare simplicity, is that entity created by legislative enactment is a corporation if the
legislature says so. After all, it is the legislature that dictates what a corporation is in the first place. This is better
illustrated by another set of entities created before martial law. These include the Mindanao Development
Authority,90 the Northern Samar Development Authority,91 the Ilocos Sur Development Authority,92 the
Southeastern Samar Development Authority93 and the Mountain Province Development Authority. 94 An
examination of the first section of the statutes creating these entities reveal that they were established "to foster
accelerated and balanced growth" of their respective regions, and towards such end, the charters commonly
provide that "it is recognized that a government corporation should be created for the purpose," and accordingly,
these charters "hereby created a body corporate."95 However, these corporations do not have capital stock nor
members, and are obliged to return the unexpended balances of their appropriations and earnings to a revolving
fund in the National Treasury. The majority effectively declassifies these entities as GOCCs, never mind the fact
that their very charters declare them to be GOCCs.

I mention these entities not to bring an element of obscurantism into the fray. I cite them as examples to
emphasize my fundamental point—that it is the legislative charters of these entities, and not the Administrative
Code, which define the class of personality of these entities created by Congress. To adopt the view of the majority
would be, in effect, to sanction an implied repeal of numerous congressional charters for the purpose of
declassifying GOCCs. Certainly, this could not have been the intent of the crafters of the Administrative Code when
they drafted the "Definition of Terms" incorporated therein.

MIAA Is Without

Doubt, A GOCC
Following the charters of government corporations, there are two kinds of GOCCs, namely: GOCCs which are stock
corporations and GOCCs which are no stock corporations (as distinguished from non-stock corporation). Stock
GOCCs are simply those which have capital stock while no stock GOCCs are those which have no capital stock.
Obviously these definitions are different from the definitions of the terms in the Corporation Code. Verily, GOCCs
which are not incorporated with the Securities and Exchange Commission are not governed by the Corporation
Code but by their respective charters.

For the MIAA's part, its charter is replete with provisions that indubitably classify it as a GOCC. Observe the
following provisions from MIAA's charter:

SECTION 3. Creation of the Manila International Airport Authority.—There is hereby established a body corporate
to be known as the Manila International Airport Authority which shall be attached to the Ministry of
Transportation and Communications. The principal office of the Authority shall be located at the New Manila
International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem
proper and necessary; Provided, That any subsidiary that may be organized shall have the prior approval of the
President.

The land where the Airport is presently located as well as the surrounding land area of approximately six hundred
hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority,
subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake
an actual survey of the area transferred within one year from the promulgation of this Executive Order and the
corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through
sale or through any other mode unless specifically approved by the President of the Philippines.

xxx

SECTION 5. Functions, Powers, and Duties. — The Authority shall have the following functions, powers and duties:

xxx

(d) To sue and be sued in its corporate name;

(e) To adopt and use a corporate seal;

(f) To succeed by its corporate name;

(g) To adopt its by-laws, and to amend or repeal the same from time to time;

(h) To execute or enter into contracts of any kind or nature;

(i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport
facility, or property of whatever kind and nature, whether movable or immovable, or any interest therein;

(j) To exercise the power of eminent domain in the pursuit of its purposes and objectives;

xxx

(o) To exercise all the powers of a corporation under the Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order.

xxx

SECTION 16. Borrowing Power. — The Authority may, after consultation with the Minister of Finance and with the
approval of the President of the Philippines, as recommended by the Minister of Transportation and
Communications, raise funds, either from local or international sources, by way of loans, credits or securities, and
other borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or
encumbrances on any of its assets or properties.
All loans contracted by the Authority under this Section, together with all interests and other sums payable in
respect thereof, shall constitute a charge upon all the revenues and assets of the Authority and shall rank equally
with one another, but shall have priority over any other claim or charge on the revenue and assets of the
Authority: Provided, That this provision shall not be construed as a prohibition or restriction on the power of the
Authority to create pledges, mortgages, and other voluntary liens or encumbrances on any assets or property of
the Authority.

Except as expressly authorized by the President of the Philippines the total outstanding indebtedness of the
Authority in the principal amount, in local and foreign currency, shall not at any time exceed the net worth of the
Authority at any given time.

xxx

The President or his duly authorized representative after consultation with the Minister of Finance may guarantee,
in the name and on behalf of the Republic of the Philippines, the payment of the loans or other indebtedness of
the Authority up to the amount herein authorized.

These cited provisions establish the fitness of MIAA to be the subject of legal relations. 96 MIAA under its charter
may acquire and possess property, incur obligations, and bring civil or criminal actions. It has the power to contract
in its own name, and to acquire title to real or personal property. It likewise may exercise a panoply of corporate
powers and possesses all the trappings of corporate personality, such as a corporate name, a corporate seal and
by-laws. All these are contained in MIAA's charter which, as conceded by the Corporation Code and even the
Administrative Code, is the primary law that governs the definition and organization of the MIAA.

In fact, MIAA itself believes that it is a GOCC represents itself as such. It said so itself in the very first paragraph of
the present petition before this Court.97 So does, apparently, the Department of Budget and Management, which
classifies MIAA as a "government owned & controlled corporation" on its internet website. 98 There is also the
matter of Executive Order No. 483, which evinces the belief of the then-president of the Philippines that MIAA is a
GOCC. And the Court before had similarly characterized MIAA as a government-owned and controlled corporation
in the earlier MIAA case, Manila International Airport Authority v. Commission on Audit. 99

Why then the hesitance to declare MIAA a GOCC? As the majority repeatedly asserts, it is because MIAA is actually
an instrumentality. But the very definition relied upon by the majority of an instrumentality under the
Administrative Code clearly states that a GOCC is likewise an instrumentality or an agency. The question of
whether MIAA is a GOCC might not even be determinative of this Petition, but the effect of the majority's
disquisition on that matter may even be more destructive than the ruling that MIAA is exempt from realty taxes. Is
the majority ready to live up to the momentous consequences of its flawed reasoning?

Novel Proviso in 1987 Constitution

Prescribing Standards in the

Creation of GOCCs Necessarily

Applies only to GOCCs Created

After 1987.

One last point on this matter on whether MIAA is a GOCC. The majority triumphantly points to Section 16, Article
XII of the 1987 Constitution, which mandates that the creation of GOCCs through special charters be "in the
interest of the common good and subject to the test of economic viability." For the majority, the test of economic
viability does not apply to government entities vested with corporate powers and performing essential public
services. But this test of "economic viability" is new to the constitutional framework. No such test was imposed in
previous Constitutions, including the 1973 Constitution which was the fundamental law in force when the MIAA
was created. How then could the MIAA, or any GOCC created before 1987 be expected to meet this new
precondition to the creation of a GOCC? Does the dissent seriously suggest that GOCCs created before 1987 may
be declassified on account of their failure to meet this "economic viability test"?
Instrumentalities and Agencies

Also Generally Liable For

Real Property Taxes

Next, the majority, having bludgeoned its way into asserting that MIAA is not a GOCC, then argues that MIAA is an
instrumentality. It cites incompletely, as earlier stated, the provision of Section 2(10) of the Administrative Code. A
more convincing view offered during deliberations, but which was not adopted by the ponencia, argued that MIAA
is not an instrumentality but an agency, considering the fact that under the Administrative Code, the MIAA is
attached within the department framework of the Department of Transportation and
Communications.100Interestingly, Executive Order No. 341, enacted by President Arroyo in 2004, similarly calls
MIAA an agency. Since instrumentalities are expressly defined as "an agency not integrated within the department
framework," that view concluded that MIAA cannot be deemed an instrumentality.

Still, that distinction is ultimately irrelevant. Of course, as stated earlier, the Administrative Code considers GOCCs
as agencies,101 so the fact that MIAA is an agency does not exclude it from classification as a GOCC. On the other
hand, the majority justifies MIAA's purported exemption on Section 133 of the Local Government Code, which
similarly situates "agencies and instrumentalities" as generally exempt from the taxation powers of LGUs. And on
this point, the majority again evades Mactan and somehow concludes that Section 133 is the general rule,
notwithstanding Sections 232 and 234(a) of the Local Government Code. And the majority's ultimate conclusion?
"By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national
government instrumentalities like the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities."102

The Court's interpretation of the Local Government Code in Mactan renders the law integrally harmonious and
gives due accord to the respective prerogatives of the national government and LGUs. Sections 133 and 234(a)
ensure that the Republic of the Philippines or its political subdivisions shall not be subjected to any form of local
government taxation, except realty taxes if the beneficial use of the property owned has been granted for
consideration to a taxable entity or person. On the other hand, Section 133 likewise assures that government
instrumentalities such as GOCCs may not be arbitrarily taxed by LGUs, since they could be subjected to local
taxation if there is a specific proviso thereon in the Code. One such proviso is Section 137, which as the Court
found in National Power Corporation,103 permits the imposition of a franchise tax on businesses enjoying a
franchise, even if it be a GOCC such as NPC. And, as the Court acknowledged in Mactan, Section 232 provides
another exception on the taxability of instrumentalities.

The majority abjectly refuses to engage Section 232 of the Local Government Code although it provides the
indubitable general rule that LGUs "may levy an annual ad valorem tax on real property such as land, building,
machinery, and other improvements not hereafter specifically exempted." The specific exemptions are provided by
Section 234. Section 232 comes sequentially after Section 133(o),104 and even if the sequencing is irrelevant,
Section 232 would fall under the qualifying phrase of Section 133, "Unless otherwise provided herein." It is sad, but
not surprising that the majority is not willing to consider or even discuss the general rule, but only the exemptions
under Section 133 and Section 234. After all, if the majority is dead set in ruling for MIAA no matter what the law
says, why bother citing what the law does say.

Constitution, Laws and

Jurisprudence Have Long

Explained the Rationale

Behind the Local Taxation

Of GOCCs.

This blithe disregard of precedents, almost all of them unanimously decided, is nowhere more evident than in the
succeeding discussion of the majority, which asserts that the power of local governments to tax national
government instrumentalities be construed strictly against local governments. The Maceda case, decided before
the Local Government Code, is cited, as is Basco. This section of the majority employs deliberate pretense that the
Code never existed, or that the fundamentals of local autonomy are of limited effect in our country. Why is it that
the Local Government Code is barely mentioned in this section of the majority? Because Section 5 of the Code,
purposely omitted by the majority provides for a different rule of interpretation than that asserted:

Section 5. Rules of Interpretation. – In the interpretation of the provisions of this Code, the following rules shall
apply:

(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of
doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government
unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local
government unit concerned;

(b) In case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government
unit enacting it, and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any local
government unit pursuant to the provisions of this Code shall be construed strictly against the person claiming it;
xxx

Yet the majority insists that "there is no point in national and local governments taxing each other, unless a sound
and compelling policy requires such transfer of public funds from one government pocket to another."105 I wonder
whether the Constitution satisfies the majority's desire for "a sound and compelling policy." To repeat:

Article II. Declaration of Principles and State Policies

xxx

Sec. 25. The State shall ensure the autonomy of local governments.

Article X. Local Government

xxx

Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.

xxx

Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic
policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

Or how about the Local Government Code, presumably an expression of sound and compelling policy considering
that it was enacted by the legislature, that veritable source of all statutes:

SEC. 129. Power to Create Sources of Revenue. - Each local government unit shall exercise its power to create its
own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units.

Justice Puno, in National Power Corporation v. City of Cabanatuan, 106 provides a more "sound and compelling
policy considerations" that would warrant sustaining the taxability of government-owned entities by local
government units under the Local Government Code.

Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support
myriad activities of the local government units for the delivery of basic services essential to the promotion of the
general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed in
the Mactan case, "the original reasons for the withdrawal of tax exemption privileges granted to government-
owned or controlled corporations and all other units of government were that such privilege resulted in serious tax
base erosion and distortions in the tax treatment of similarly situated enterprises." With the added burden of
devolution, it is even more imperative for government entities to share in the requirements of development, fiscal
or otherwise, by paying taxes or other charges due from them.107
I dare not improve on Justice Puno's exhaustive disquisition on the statutory and jurisprudential shift brought
about the acceptance of the principles of local autonomy:

In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has
become a tool to realize social justice and the equitable distribution of wealth, economic progress and the
protection of local industries as well as public welfare and similar objectives. Taxation assumes even greater
significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges
pursuant to Article X, section 5 of the 1987 Constitution, viz:

"Section 5. Each Local Government unit shall have the power to create its own sources of revenue, to levy taxes,
fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic
policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments."

This paradigm shift results from the realization that genuine development can be achieved only by strengthening
local autonomy and promoting decentralization of governance. For a long time, the country's highly centralized
government structure has bred a culture of dependence among local government leaders upon the national
leadership. It has also "dampened the spirit of initiative, innovation and imaginative resilience in matters of local
development on the part of local government leaders." 35 The only way to shatter this culture of dependence is to
give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their
own sources for the purpose. To achieve this goal, section 3 of Article X of the 1987 Constitution mandates
Congress to enact a local government code that will, consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers, viz:

"Section 3. The Congress shall enact a local government code which shall provide for a more responsive and
accountable local government structure instituted through a system of decentralization with effective mechanisms
of recall, initiative, and referendum, allocate among the different local government units their powers,
responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and all other matters relating to the organization and
operation of the local units."

To recall, prior to the enactment of the Rep. Act No. 7160, also known as the Local Government Code of 1991
(LGC), various measures have been enacted to promote local autonomy. These include the Barrio Charter of 1959,
the Local Autonomy Act of 1959, the Decentralization Act of 1967 and the Local Government Code of 1983.
Despite these initiatives, however, the shackles of dependence on the national government remained. Local
government units were faced with the same problems that hamper their capabilities to participate effectively in
the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal control over external
sources of income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control over personnel of national line agencies.

Considered as the most revolutionary piece of legislation on local autonomy, the LGC effectively deals with the
fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous
laws such as the imposition of taxes on forest products, forest concessionaires, mineral products, mining
operations, and the like. The LGC likewise provides enough flexibility to impose tax rates in accordance with their
needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the minimum and
maximum tax rates and leaves the determination of the actual rates to the respective sanggunian. 108

And the Court's ruling through Justice Azcuna in Philippine Ports Authority v. City of Iloilo 109, provides especially
clear and emphatic rationale:

In closing, we reiterate that in taxing government-owned or controlled corporations, the State ultimately suffers
no loss. In National Power Corp. v. Presiding Judge, RTC, Br. XXV, 38 we elucidated:

Actually, the State has no reason to decry the taxation of NPC's properties, as and by way of real property taxes.
Real property taxes, after all, form part and parcel of the financing apparatus of the Government in development
and nation-building, particularly in the local government level.

xxxxxxxxx
To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other.
In no measure can the government be said to have lost anything.

Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax exemption privileges
granted to government-owned and controlled corporations and all other units of government was that such
privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises,
hence resulting in the need for these entities to share in the requirements of development, fiscal or otherwise, by
paying the taxes and other charges due from them.110

How does the majority counter these seemingly valid rationales which establish the soundness of a policy
consideration subjecting national instrumentalities to local taxation? Again, by simply ignoring that these doctrines
exist. It is unfortunate if the majority deems these cases or the principles of devolution and local autonomy as
simply too inconvenient, and relies instead on discredited precedents. Of course, if the majority faces the issues
squarely, and expressly discusses why Basco was right and Mactan was wrong, then this entire endeavor of the
Court would be more intellectually satisfying. But, this is not a game the majority wants to play.

Mischaracterization of My

Views on the Tax Exemption

Enjoyed by the National Government

Instead, the majority engages in an extended attack pertaining to Section 193, mischaracterizing my views on that
provision as if I had been interpreting the provision as making "the national government, which itself is a juridical
person, subject to tax by local governments since the national government is not included in the enumeration of
exempt entities in Section 193."111

Nothing is farther from the truth. I have never advanced any theory of the sort imputed in the majority. My main
thesis on the matter merely echoes the explicit provision of Section 193 that unless otherwise provided in the
Local Government Code (LGC) all tax exemptions enjoyed by all persons, whether natural or juridical, including
GOCCs, were withdrawn upon the effectivity of the Code. Since the provision speaks of withdrawal of tax
exemptions of persons, it follows that the exemptions theretofore enjoyed by MIAA which is definitely a person
are deemed withdrawn upon the advent of the Code.

On the other hand, the provision does not address the question of who are beyond the reach of the taxing power
of LGUs. In fine, the grant of tax exemption or the withdrawal thereof assumes that the person or entity involved is
subject to tax. Thus, Section 193 does not apply to entities which were never given any tax exemption. This would
include the national government and its political subdivisions which, as a general rule, are not subjected to tax in
the first place.112 Corollarily, the national government and its political subdivisions do not need tax exemptions.
And Section 193 which ordains the withdrawal of tax exemptions is obviously irrelevant to them.

Section 193 is in point for the disposition of this case as it forecloses dependence for the grant of tax exemption to
MIAA on Section 21 of its charter. Even the majority should concede that the charter section is now ineffectual, as
Section 193 withdraws the tax exemptions previously enjoyed by all juridical persons.

With Section 193 mandating the withdrawal of tax exemptions granted to all persons upon the effectivity of the
LGC, for MIAA to continue enjoying exemption from realty tax, it will have to rely on a basis other than Section 21
of its charter.

Lung Center of the Philippines v. Quezon City113 provides another illustrative example of the jurisprudential havoc
wrought about by the majority. Pursuant to its charter, the Lung Center was organized as a trust administered by
an eponymous GOCC organized with the SEC.114 There is no doubt it is a GOCC, even by the majority's reckoning.
Applying the Administrative Code, it is also considered as an agency, the term encompassing even GOCCs. Yet since
the Administrative Code definition of "instrumentalities" encompasses agencies, especially those not attached to a
line department such as the Lung Center, it also follows that the Lung Center is an instrumentality, which for the
majority is exempt from all local government taxes, especially real estate taxes. Yet just in 2004, the Court
unanimously held that the Lung Center was not exempt from real property taxes. Can the majority and Lung
Center be reconciled? I do not see how, and no attempt is made to demonstrate otherwise.
Another key point. The last paragraph of Section 234 specifically asserts that any previous exemptions from realty
taxes granted to or enjoyed by all persons, including all GOCCs, are thereby withdrawn. The majority's
interpretation of Sections 133 and 234(a) however necessarily implies that all instrumentalities, including GOCCs,
can never be subjected to real property taxation under the Code. If that is so, what then is the sense of the last
paragraph specifically withdrawing previous tax exemptions to all persons, including GOCCs when juridical persons
such as MIAA are anyway, to his view, already exempt from such taxes under Section 133? The majority's
interpretation would effectively render the express and emphatic withdrawal of previous exemptions to GOCCs
inutile. Ut magis valeat quam pereat. Hence, where a statute is susceptible of more than one interpretation, the
court should adopt such reasonable and beneficial construction which will render the provision thereof operative
and effective, as well as harmonious with each other.115

But, the majority seems content rendering as absurd the Local Government Code, since it does not have much use
anyway for the Code's general philosophy of fiscal autonomy, as evidently seen by the continued reliance on Basco
or Maceda. Local government rule has never been a grant of emancipation from the national government. This is
the favorite bugaboo of the opponents of local autonomy—the fallacy that autonomy equates to independence.

Thus, the conclusion of the majority is that under Section 133(o), MIAA as a government instrumentality is beyond
the reach of local taxation because it is not subject to taxes, fees or charges of any kind. Moreover, the taxation of
national instrumentalities and agencies by LGUs should be strictly construed against the LGUs, citing Maceda and
Basco. No mention is made of the subsequent rejection of these cases in jurisprudence following the Local
Government Code, including Mactan. The majority is similarly silent on the general rule under Section 232 on real
property taxation or Section 5 on the rules of construction of the Local Government Code.

V.

MIAA, and not the National Government

Is the Owner of the Subject Taxable Properties

Section 232 of the Local Government Code explicitly provides that there are exceptions to the general rule on rule
property taxation, as "hereafter specifically exempted." Section 234, certainly "hereafter," provides indubitable
basis for exempting entities from real property taxation. It provides the most viable legal support for any claim that
an governmental entity such as the MIAA is exempt from real property taxes. To repeat:

SECTION 234. Exemptions from Real Property Tax. -- The following are exempted from payment of the real
property tax:

xxx

(f) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person:

The majority asserts that the properties owned by MIAA are owned by the Republic of the Philippines, thus placing
them under the exemption under Section 234. To arrive at this conclusion, the majority employs four main
arguments.

MIAA Property Is Patrimonial

And Not Part of Public Dominion

The majority claims that the Airport Lands and Buildings are property of public dominion as defined by the Civil
Code, and therefore owned by the State or the Republic of the Philippines. But as pointed out by Justice Azcuna in
the first PPA case, if indeed a property is considered part of the public dominion, such property is "owned by the
general public and cannot be declared to be owned by a public corporation, such as [the PPA]."

Relevant on this point are the following provisions of the MIAA charter:

Section 3. Creation of the Manila International Airport Authority. – xxx

The land where the Airport is presently located as well as the surrounding land area of approximately six hundred
hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority,
subject to existing rights, if any. xxx Any portion thereof shall not be disposed through sale or through any other
mode unless specifically approved by the President of the Philippines.

Section 22. Transfer of Existing Facilities and Intangible Assets. – All existing public airport facilities, runways, lands,
buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers rights,
interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations,
including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby
transferred to the Authority.

Clearly, it is the MIAA, and not either the State, the Republic of the Philippines or the national government that
asserts legal title over the Airport Lands and Buildings. There was an express transfer of ownership between the
MIAA and the national government. If the distinction is to be blurred, as the majority does, between the
State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter showcases the
remarkable absurdity of an entity transferring property to itself.

Nothing in the Civil Code or the Constitution prohibits the State from transferring ownership over property of
public dominion to an entity that it similarly owns. It is just like a family transferring ownership over the properties
its members own into a family corporation. The family exercises effective control over the administration and
disposition of these properties. Yet for several purposes under the law, such as taxation, it is the corporation that
is deemed to own those properties. A similar situation obtains with MIAA, the State, and the Airport Lands and
Buildings.

The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful doctrines in this
regard. The Court refuted the claim that the properties of the PPA were owned by the Republic of the Philippines,
noting that PPA's charter expressly transferred ownership over these properties to the PPA, a situation which
similarly obtains with MIAA. The Court even went as far as saying that the fact that the PPA "had not been issued
any torrens title over the port and port facilities and appurtenances is of no legal consequence. A torrens title does
not, by itself, vest ownership; it is merely an evidence of title over properties. xxx It has never been recognized as a
mode of acquiring ownership over real properties."116

The Court further added:

xxx The bare fact that the port and its facilities and appurtenances are accessible to the general public does not
exempt it from the payment of real property taxes. It must be stressed that the said port facilities and
appurtenances are the petitioner's corporate patrimonial properties, not for public use, and that the operation of
the port and its facilities and the administration of its buildings are in the nature of ordinary business. The
petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its
proprietary interests xxx The petitioner is even empowered to invest its funds in such government securities
approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the
port premises, appliances or equipment. xxx Clearly then, the petitioner is a profit-earning corporation; hence, its
patrimonial properties are subject to tax.117

There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public use. A similar
argument was propounded by the Light Rail Transit Authority in Light Rail Transit Authority v. Central Board of
Assessment,118 which was cited in Philippine Ports Authority and deserves renewed emphasis. The Light Rail Transit
Authority (LRTA), a body corporate, "provides valuable transportation facilities to the paying public."119 It claimed
that its carriage-ways and terminal stations are immovably attached to government-owned national roads, and to
impose real property taxes thereupon would be to impose taxes on public roads. This view did not persuade the
Court, whose decision was penned by Justice (now Chief Justice) Panganiban. It was noted:

Though the creation of the LRTA was impelled by public service — to provide mass transportation to alleviate the
traffic and transportation situation in Metro Manila — its operation undeniably partakes of ordinary business.
Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives.
Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is
engaged in a service-oriented commercial endeavor, its carriageways and terminal stations are patrimonial
property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation.
xxx

Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the
carriageways and terminal stations are the commuting public. It adds that the public use character of the LRT is not
negated by the fact that revenue is obtained from the latter's operations.

We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who
pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT
carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is
nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business
and earns money therefrom.120

xxx

Even granting that the national government indeed owns the carriageways and terminal stations, the exemption
would not apply because their beneficial use has been granted to petitioner, a taxable entity. 121

There is no substantial distinction between the properties held by the PPA, the LRTA, and the MIAA. These three
entities are in the business of operating facilities that promote public transportation.

The majority further asserts that MIAA's properties, being part of the public dominion, are outside the commerce
of man. But if this is so, then why does Section 3 of MIAA's charter authorize the President of the Philippines to
approve the sale of any of these properties? In fact, why does MIAA's charter in the first place authorize the
transfer of these airport properties, assuming that indeed these are beyond the commerce of man?

No Trust Has Been Created

Over MIAA Properties For

The Benefit of the Republic

The majority posits that while MIAA might be holding title over the Airport Lands and Buildings, it is holding it in
trust for the Republic. A provision of the Administrative Code is cited, but said provision does not expressly provide
that the property is held in trust. Trusts are either express or implied, and only those situations enumerated under
the Civil Code would constitute an implied trust. MIAA does not fall within this enumeration, and neither is there a
provision in MIAA's charter expressly stating that these properties are being held in trust. In fact, under its charter,
MIAA is obligated to retain up to eighty percent (80%) of its gross operating income, not an inconsequential sum
assuming that the beneficial owner of MIAA's properties is actually the Republic, and not the MIAA.

Also, the claim that beneficial ownership over the MIAA remains with the government and not MIAA is ultimately
irrelevant. Section 234(a) of the Local Government Code provides among those exempted from paying real
property taxes are "[r]eal property owned by the [Republic]… except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person." In the context of Section 234(a), the identity of the
beneficial owner over the properties is not determinative as to whether the exemption avails. It is the identity of
the beneficial user of the property owned by the Republic or its political subdivisions that is crucial, for if said
beneficial user is a taxable person, then the exemption does not lie.

I fear the majority confuses the notion of what might be construed as "beneficial ownership" of the Republic over
the properties of MIAA as nothing more than what arises as a consequence of the fact that the capital of MIAA is
contributed by the National Government.122 If so, then there is no difference between the State's ownership rights
over MIAA properties than those of a majority stockholder over the properties of a corporation. Even if such
shareholder effectively owns the corporation and controls the disposition of its assets, the personality of the
stockholder remains separately distinct from that of the corporation. A brief recall of the entrenched rule in
corporate law is in order:

The first consequence of the doctrine of legal entity regarding the separate identity of the corporation and its
stockholders insofar as their obligations and liabilities are concerned, is spelled out in this general rule deeply
entrenched in American jurisprudence:
Unless the liability is expressly imposed by constitutional or statutory provisions, or by the charter, or by special
agreement of the stockholders, stockholders are not personally liable for debts of the corporation either at law or
equity. The reason is that the corporation is a legal entity or artificial person, distinct from the members who
compose it, in their individual capacity; and when it contracts a debt, it is the debt of the legal entity or artificial
person – the corporation – and not the debt of the individual members. (13A Fletcher Cyc. Corp. Sec. 6213)

The entirely separate identity of the rights and remedies of a corporation itself and its individual stockholders have
been given definite recognition for a long time. Applying said principle, the Supreme Court declared that a
corporation may not be made to answer for acts or liabilities of its stockholders or those of legal entities to which
it may be connected, or vice versa. (Palay Inc. v. Clave et. al. 124 SCRA 638) It was likewise declared in a similar
case that a bonafide corporation should alone be liable for corporate acts duly authorized by its officers and
directors. (Caram Jr. v. Court of Appeals et.al. 151 SCRA, p. 372)123

It bears repeating that MIAA under its charter, is expressly conferred the right to exercise all the powers of a
corporation under the Corporation Law, including the right to corporate succession, and the right to sue and be
sued in its corporate name.124 The national government made a particular choice to divest ownership and
operation of the Manila International Airport and transfer the same to such an empowered entity due to perceived
advantages. Yet such transfer cannot be deemed consequence free merely because it was the State which
contributed the operating capital of this body corporate.

The majority claims that the transfer the assets of MIAA was meant merely to effect a reorganization. The imputed
rationale for such transfer does not serve to militate against the legal consequences of such assignment. Certainly,
if it was intended that the transfer should be free of consequence, then why was it effected to a body corporate,
with a distinct legal personality from that of the State or Republic? The stated aims of the MIAA could have very
well been accomplished by creating an agency without independent juridical personality.

VI.

MIAA Performs Proprietary Functions

Nonetheless, Section 234(f) exempts properties owned by the Republic of the Philippines or its political
subdivisions from realty taxation. The obvious question is what comprises "the Republic of the Philippines." I think
the key to understanding the scope of "the Republic" is the phrase "political subdivisions." Under the Constitution,
political subdivisions are defined as "the provinces, cities, municipalities and barangays."125 In correlation, the
Administrative Code of 1987 defines "local government" as referring to "the political subdivisions established by or
in accordance with the Constitution."

Clearly then, these political subdivisions are engaged in the exercise of sovereign functions and are accordingly
exempt. The same could be said generally of the national government, which would be similarly exempt. After all,
even with the principle of local autonomy, it is inherently noxious and self-defeatist for local taxation to interfere
with the sovereign exercise of functions. However, the exercise of proprietary functions is a different matter
altogether.

Sovereign and Proprietary

Functions Distinguished

Sovereign or constituent functions are those which constitute the very bonds of society and are compulsory in
nature, while ministrant or proprietary functions are those undertaken by way of advancing the general interests
of society and are merely optional.126 An exhaustive discussion on the matter was provided by the Court in Bacani
v. NACOCO:127

xxx This institution, when referring to the national government, has reference to what our Constitution has
established composed of three great departments, the legislative, executive, and the judicial, through which the
powers and functions of government are exercised. These functions are twofold: constituent and ministrant. The
former are those which constitute the very bonds of society and are compulsory in nature; the latter are those that
are undertaken only by way of advancing the general interests of society, and are merely optional. President
Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons and property from violence and robbery.

'(2) The fixing of the legal relations between man and wife and between parents and children.

'(3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities
for debt or for crime.

'(4) The determination of contract rights between individuals.

'(5) The definition and punishment of crime.

'(6) The administration of justice in civil cases.

'(7) The determination of the political duties, privileges, and relations of citizens.

'(8) Dealings of the state with foreign powers: the preservation of the state from external danger or encroachment
and the advancement of its international interests.'" (Malcolm, The Government of the Philippine Islands, p. 19.)

The most important of the ministrant functions are: public works, public education, public charity, health and
safety regulations, and regulations of trade and industry. The principles determining whether or not a government
shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those
things which private capital would not naturally undertake and (2) that a government should do these things which
by its very nature it is better equipped to administer for the public welfare than is any private individual or group
of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.)

From the above we may infer that, strictly speaking, there are functions which our government is required to
exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of
sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the
people. To this latter class belongs the organization of those corporations owned or controlled by the government
to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are
what we call government-owned or controlled corporations which may take on the form of a private enterprise or
one organized with powers and formal characteristics of a private corporations under the Corporation Law. 128

The Court in Bacani rejected the proposition that the National Coconut Corporation exercised sovereign functions:

Does the fact that these corporations perform certain functions of government make them a part of the
Government of the Philippines?

The answer is simple: they do not acquire that status for the simple reason that they do not come under the
classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it was
organized with the purpose of "adjusting the coconut industry to a position independent of trade preferences in
the United States" and of providing "Facilities for the better curing of copra products and the proper utilization of
coconut by-products," a function which our government has chosen to exercise to promote the coconut industry,
however, it was given a corporate power separate and distinct from our government, for it was made subject to
the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are
concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any
other private corporations, and in this sense it is an entity different from our government. As this Court has aptly
said, "The mere fact that the Government happens to be a majority stockholder does not make it a public
corporation" (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). "By becoming a stockholder in
the National Coal Company, the Government divested itself of its sovereign character so far as respects the
transactions of the corporation. . . . Unlike the Government, the corporation may be sued without its consent, and
is subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government."
(Government of the Philippine Islands vs. Springer, 50 Phil., 288.)

The following restatement of the entrenched rule by former SEC Chairperson Rosario Lopez bears noting:

The fact that government corporations are instrumentalities of the State does not divest them with immunity from
suit. (Malong v. PNR, 138 SCRA p. 63) It is settled that when the government engages in a particular business
through the instrumentality of a corporation, it divests itself pro hoc vice of its sovereign character so as to subject
itself to the rules governing private corporations, (PNB v. Pabolan 82 SCRA 595) and is to be treated like any other
corporation. (PNR v. Union de Maquinistas Fogonero y Motormen, 84 SCRA 223)

In the same vein, when the government becomes a stockholder in a corporation, it does not exercise sovereignty
as such. It acts merely as a corporator and exercises no other power in the management of the affairs of the
corporation than are expressly given by the incorporating act. Nor does the fact that the government may own all
or a majority of the capital stock take from the corporation its character as such, or make the government the real
party in interest. (Amtorg Trading Corp. v. US 71 F2d 524, 528)129

MIAA Performs Proprietary

Functions No Matter How

Vital to the Public Interest

The simple truth is that, based on these accepted doctrinal tests, MIAA performs proprietary functions. The
operation of an airport facility by the State may be imbued with public interest, but it is by no means indispensable
or obligatory on the national government. In fact, as demonstrated in other countries, it makes a lot of economic
sense to leave the operation of airports to the private sector.

The majority tries to becloud this issue by pointing out that the MIAA does not compete in the marketplace as
there is no competing international airport operated by the private sector; and that MIAA performs an essential
public service as the primary domestic and international airport of the Philippines. This premise is false, for one.
On a local scale, MIAA competes with other international airports situated in the Philippines, such as Davao
International Airport and MCIAA. More pertinently, MIAA also competes with other international airports in Asia,
at least. International airlines take into account the quality and conditions of various international airports in
determining the number of flights it would assign to a particular airport, or even in choosing a hub through which
destinations necessitating connecting flights would pass through.

Even if it could be conceded that MIAA does not compete in the market place, the example of the Philippine
National Railways should be taken into account. The PNR does not compete in the marketplace, and performs an
essential public service as the operator of the railway system in the Philippines. Is the PNR engaged in sovereign
functions? The Court, in Malong v. Philippine National Railways,130 held that it was not.131

Even more relevant to this particular case is Teodoro v. National Airports Corporation, 132 concerning the proper
appreciation of the functions performed by the Civil Aeronautics Administration (CAA), which had succeeded the
defunction National Airports Corporation. The CAA claimed that as an unincorporated agency of the Republic of
the Philippines, it was incapable of suing and being sued. The Court noted:

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of
any kind, to purchase property, and to grant concession rights, and under Section 4, to charge landing fees,
royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property
under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued.
The power to sue and be sued is implied from the power to transact private business. And if it has the power to
sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have the power to
prosecute and defend suits for and against the National Airports Corporation, having acquired all the properties,
funds and choses in action and assumed all the liabilities of the latter. To deny the National Airports Corporation's
creditors access to the courts of justice against the Civil Aeronautics Administration is to say that the government
could impair the obligation of its corporations by the simple expedient of converting them into unincorporated
agencies. 133

xxx

Eventually, the charter of the CAA was revised, and it among its expanded functions was "[t]o administer, operate,
manage, control, maintain and develop the Manila International Airport."134 Notwithstanding this expansion, in the
1988 case of CAA v. Court of Appeals135 the Court reaffirmed the ruling that the CAA was engaged in "private or
non-governmental functions."136 Thus, the Court had already ruled that the predecessor agency of MIAA, the CAA
was engaged in private or non-governmental functions. These are more precedents ignored by the majority. The
following observation from the Teodoro case very well applies to MIAA.

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate
it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to
run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel
and the convenience of the traveling public. It is engaged in an enterprise which, far from being the exclusive
prerogative of state, may, more than the construction of public roads, be undertaken by private concerns. 137

If the determinative point in distinguishing between sovereign functions and proprietary functions is the vitality of
the public service being performed, then it should be noted that there is no more important public service
performed than that engaged in by public utilities. But notably, the Constitution itself authorizes private persons to
exercise these functions as it allows them to operate public utilities in this country 138 If indeed such functions are
actually sovereign and belonging properly to the government, shouldn't it follow that the exercise of these tasks
remain within the exclusive preserve of the State?

There really is no prohibition against the government taxing itself, 139 and nothing obscene with allowing
government entities exercising proprietary functions to be taxed for the purpose of raising the coffers of LGUs. On
the other hand, it would be an even more noxious proposition that the government or the instrumentalities that it
owns are above the law and may refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in the
exercise of proprietary, and not sovereign functions, cannot avoid the adverse-effects of tax evasion simply on the
claim that it is imbued with some of the attributes of government.

VII.

MIAA Property Not Subject to

Execution Sale Without Consent

Of the President.

Despite the fact that the City of Parañaque ineluctably has the power to impose real property taxes over the MIAA,
there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA
charter states that "[a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and
administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically
approved by the President of the Philippines."140

Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing
this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of
delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of
the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions
on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on
one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or
disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means that the
LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable
negotiated solution.141

There are several other reasons this statutory limitation should be upheld and applied to this case. It is at this
juncture that the importance of the Manila Airport to our national life and commerce may be accorded proper
consideration. The closure of the airport, even by reason of MIAA's legal omission to pay its taxes, will have an
injurious effect to our national economy, which is ever reliant on air travel and traffic. The same effect would
obtain if ownership and administration of the airport were to be transferred to an LGU or some other entity which
were not specifically chartered or tasked to perform such vital function. It is for this reason that the MIAA charter
specifically forbids the sale or disposition of MIAA properties without the consent of the President. The prohibition
prevents the peremptory closure of the MIAA or the hampering of its operations on account of the demands of its
creditors. The airport is important enough to be sheltered by legislation from ordinary legal processes.
Section 3 of the MIAA charter may also be appreciated as within the proper exercise of executive control by the
President over the MIAA, a GOCC which despite its separate legal personality, is still subsumed within the
executive branch of government. The power of executive control by the President should be upheld so long as such
exercise does not contravene the Constitution or the law, the President having the corollary duty to faithfully
execute the Constitution and the laws of the land. 142 In this case, the exercise of executive control is precisely
recognized and authorized by the legislature, and it should be upheld even if it comes at the expense of limiting
the power of local government units to collect real property taxes.

Had this petition been denied instead with Mactan as basis, but with the caveat that the MIAA properties could
not be subject of execution sale without the consent of the President, I suspect that the parties would feel little
distress. Through such action, both the Local Government Code and the MIAA charter would have been upheld.
The prerogatives of LGUs in real property taxation, as guaranteed by the Local Government Code, would have been
preserved, yet the concerns about the ruinous effects of having to close the Manila International Airport would
have been averted. The parties would then be compelled to try harder at working out a compromise, a task, if I
might add, they are all too willing to engage in. 143 Unfortunately, the majority will cause precisely the opposite
result of unremitting hostility, not only to the City of Parañaque, but to the thousands of LGUs in the country.

VIII.

Summary of Points

My points may be summarized as follows:

1) Mactan and a long line of succeeding cases have already settled the rule that under the Local Government Code,
enacted pursuant to the constitutional mandate of local autonomy, all natural and juridical persons, even those
GOCCs, instrumentalities and agencies, are no longer exempt from local taxes even if previously granted an
exemption. The only exemptions from local taxes are those specifically provided under the Local Government Code
itself, or those enacted through subsequent legislation.

2) Under the Local Government Code, particularly Section 232, instrumentalities, agencies and GOCCs are generally
liable for real property taxes. The only exemptions therefrom under the same Code are provided in Section 234,
which include real property owned by the Republic of the Philippines or any of its political subdivisions.

3) The subject properties are owned by MIAA, a GOCC, holding title in its own name. MIAA, a separate legal entity
from the Republic of the Philippines, is the legal owner of the properties, and is thus liable for real property taxes,
as it does not fall within the exemptions under Section 234 of the Local Government Code.

4) The MIAA charter expressly bars the sale or disposition of MIAA properties. As a result, the City of Parañaque is
prohibited from seizing or selling these properties by public auction in order to satisfy MIAA's tax liability. In the
end, MIAA is encumbered only by a limited lien possessed by the City of Parañaque.

On the other hand, the majority's flaws are summarized as follows:

1) The majority deliberately ignores all precedents which run counter to its hypothesis, including Mactan. Instead,
it relies and directly cites those doctrines and precedents which were overturned by Mactan. By imposing a
different result than that warranted by the precedents without explaining why Mactan or the other precedents are
wrong, the majority attempts to overturn all these ruling sub silencio and without legal justification, in a manner
that is not sanctioned by the practices and traditions of this Court.

2) The majority deliberately ignores the policy and philosophy of local fiscal autonomy, as mandated by the
Constitution, enacted under the Local Government Code, and affirmed by precedents. Instead, the majority asserts
that there is no sound rationale for local governments to tax national government instrumentalities, despite the
blunt existence of such rationales in the Constitution, the Local Government Code, and precedents.

3) The majority, in a needless effort to justify itself, adopts an extremely strained exaltation of the Administrative
Code above and beyond the Corporation Code and the various legislative charters, in order to impose a wholly
absurd definition of GOCCs that effectively declassifies innumerable existing GOCCs, to catastrophic legal
consequences.
4) The majority asserts that by virtue of Section 133(o) of the Local Government Code, all national government
agencies and instrumentalities are exempt from any form of local taxation, in contravention of several precedents
to the contrary and the proviso under Section 133, "unless otherwise provided herein [the Local Government
Code]."

5) The majority erroneously argues that MIAA holds its properties in trust for the Republic of the Philippines, and
that such properties are patrimonial in character. No express or implied trust has been created to benefit the
national government. The legal distinction between sovereign and proprietary functions, as affirmed by
jurisprudence, likewise preclude the classification of MIAA properties as patrimonial.

IX.

Epilogue

If my previous discussion still fails to convince on how wrong the majority is, then the following points are well-
worth considering. The majority cites the Bangko Sentral ng Pilipinas (Bangko Sentral) as a government
instrumentality that exercises corporate powers but not organized as a stock or non-stock corporation.
Correspondingly for the majority, the Bangko ng Sentral is exempt from all forms of local taxation by LGUs by
virtue of the Local Government Code.

Section 125 of Rep. Act No. 7653, The New Central Bank Act, states:

SECTION 125. Tax Exemptions. — The Bangko Sentral shall be exempt for a period of five (5) years from the
approval of this Act from all national, provincial, municipal and city taxes, fees, charges and assessments.

The New Central Bank Act was promulgated after the Local Government Code if the BSP is already preternaturally
exempt from local taxation owing to its personality as an "government instrumentality," why then the need to
make a new grant of exemption, which if the majority is to be believed, is actually a redundancy. But even more
tellingly, does not this provision evince a clear intent that after the lapse of five (5) years, that the Bangko Sentral
will be liable for provincial, municipal and city taxes? This is the clear congressional intent, and it is Congress, not
this Court which dictates which entities are subject to taxation and which are exempt.

Perhaps this notion will offend the majority, because the Bangko Sentral is not even a government owned
corporation, but a government instrumentality, or perhaps "loosely", a "government corporate entity." How could
such an entity like the Bangko Sentral , which is not even a government owned corporation, be subjected to local
taxation like any mere mortal? But then, see Section 1 of the New Central Bank Act:

SECTION 1. Declaration of Policy. — The State shall maintain a central monetary authority that shall function and
operate as an independent and accountable body corporate in the discharge of its mandated responsibilities
concerning money, banking and credit. In line with this policy, and considering its unique functions and
responsibilities, the central monetary authority established under this Act, while being a government-owned
corporation, shall enjoy fiscal and administrative autonomy.

Apparently, the clear legislative intent was to create a government corporation known as the Bangko Sentral ng
Pilipinas. But this legislative intent, the sort that is evident from the text of the provision and not the one that
needs to be unearthed from the bowels of the archival offices of the House and the Senate, is for naught to the
majority, as it contravenes the Administrative Code of 1987, which after all, is "the governing law defining the
status and relationship of government agencies and instrumentalities" and thus superior to the legislative charter
in determining the personality of a chartered entity. Its like saying that the architect who designed a school
building is better equipped to teach than the professor because at least the architect is familiar with the geometry
of the classroom.

Consider further the example of the Philippine Institute of Traditional and Alternative Health Care (PITAHC),
created by Republic Act No. 8243 in 1997. It has similar characteristics as MIAA in that it is established as a body
corporate,144 and empowered with the attributes of a corporation,145 including the power to purchase or acquire
real properties.146 However the PITAHC has no capital stock and no members, thus following the majority, it is not
a GOCC.
The state policy that guides PITAHC is the development of traditional and alternative health care, 147 and its
objectives include the promotion and advocacy of alternative, preventive and curative health care modalities that
have been proven safe, effective and cost effective. 148 "Alternative health care modalities" include "other forms of
non-allophatic, occasionally non-indigenous or imported healing methods" which include, among others
"reflexology, acupuncture, massage, acupressure" and chiropractics. 149

Given these premises, there is no impediment for the PITAHC to purchase land and construct thereupon a massage
parlor that would provide a cheaper alternative to the opulent spas that have proliferated around the metropolis.
Such activity is in line with the purpose of the PITAHC and with state policy. Is such massage parlor exempt from
realty taxes? For the majority, it is, for PITAHC is an instrumentality or agency exempt from local government
taxation, which does not fall under the exceptions under Section 234 of the Local Government Code. Hence, this
massage parlor would not just be a shelter for frazzled nerves, but for taxes as well.

Ridiculous? One might say, certainly a decision of the Supreme Court cannot be construed to promote an
absurdity. But precisely the majority, and the faulty reasoning it utilizes, opens itself up to all sorts of mischief, and
certainly, a tax-exempt massage parlor is one of the lesser evils that could arise from the majority ruling. This is
indeed a very strange and very wrong decision.

I dissent.

DANTE O. TINGA

Associate Justice

G.R. No. L-21484 November 29, 1969

THE AGRICULTURAL CREDIT and COOPERATIVE FINANCING ADMINISTRATION (ACCFA), petitioner,

vs.
ACCFA SUPERVISORS' ASSOCIATION, ACCFA WORKERS' ASSOCIATION, and THE COURT OF INDUSTRIAL
RELATIONS, respondents.

Deogracias E. Lerma and Esmeraldo U. Guloy for petitioner Agricultural Credit and Cooperative Financing
Administration.
Office of the Agrarian Counsel, Department of Justice for petitioner Agricultural Credit Administration
J. C. Espinas and Associates for respendents Confederation of Unions in Government Corporations
Offices, et al. Mariano B. Tuason for respondent Court of Industrial Relations.

MAKALINTAL, J.:

These are two separate appeals by certiorari
from the decision dated March 25, 1963 (G.R.
No. L-21484) and the order dated May 21, 1964
(G.R. No. L-23605) as affirmed by the
resolutions en banc, of the Court of Industrial
Relations, in Cases Nos. 3450-ULP and 1327-
MC, respectively. The parties, except the
Confederation of Unions in Government
Corporations and Offices (CUGCO), being
practically the same and the principal issues
involved related, only one decision is now
rendered in these two cases.
machinery was reorganized and its name
changed to Agricultural Credit Administration
(ACA) under the Land Reform Code (Republic
Act No. 3844). On the other hand, the ACCFA
Supervisors' Association (ASA) and the ACCFA
Workers' Association (AWA), hereinafter
referred to as the Unions, are labor
organizations composed of the supervisors and
the rank-and-file employees, respectively, in the
ACCFA (now ACA).
G.R. No. L-21484

The Agricultural Credit and Cooperative On September 4, 1961 a collective bargaining

Financing Administration (ACCFA) was a agreement, which was to be effective for a
government agency created under Republic Act period of one (1) year from July 1, 1961, was
No. 821, as amended. Its administrative entered into by and between the Unions and
the ACCFA. A few months thereafter, the
Unions started protesting against alleged
violations and non-implementation of said
agreement. Finally, on October 25, 1962 the
Unions declared a strike, which was ended
when the strikers voluntarily returned to work
on November 26, 1962.
On October 30, 1962 the Unions, together with
its mother union, the Confederation of Unions
in Government Corporations and Offices
(CUGCO), filed a complaint with the Court of
Industrial Relations against the ACCFA (Case No.
3450-ULP) for having allegedly committed acts
of unfair labor practice, namely: violation of the
collective bargaining agreement in order to
discourage the members of the Unions in the
exercise of their right to self-organization,
discrimination against said members in the
matter of promotions, and refusal to bargain.
The ACCFA denied the charges and interposed
as affirmative and special defenses lack of
jurisdiction of the CIR over the case, illegality of
the bargaining contract, expiration of said
contract and lack of approval by the office of
the President of the fringe benefits provided for
therein. Brushing aside the foregoing defenses,
the CIR in its decision dated March 25, 1963
ordered the ACCFA:
1. To cease and desist from committing
further acts tending to discourage the
members of complainant unions in the
exercise of their right to self-
organization;
2. To comply with and implement the
provision of the collective bargaining
contract executed on September 4,
1961, including the payment of P30.00
a month living allowance;
3. To bargain in good faith and
expeditiously with the herein
complainants.
The ACCFA moved to reconsider but was turned
down in a resolution dated April 25, 1963 of the
CIR en banc. Thereupon it brought this appeal
by certiorari.
The ACCFA raises the following issues in its
petition, to wit:
1. Whether or not the respondent court
has jurisdiction over this case, which in
turn depends on whether or not ACCFA
exercised governmental or proprietary
functions.
2. Whether or not the collective
bargaining agreement between the
petitioner and the respondent union is
valid; if valid, whether or not it has
already lapsed; and if not, whether or
not its (sic) fringe benefits are already
enforceable.
3. Whether or not there is a legal
and/or factual basis for the finding of
the respondent court that the
petitioner had committed acts of unfair
labor practice.
4. Whether or not it is within the
competence of the court to enforce the
collective bargaining agreement
between the petitioner and the
respondent unions, the same having
already expired.
G.R. No. L-23605
During the pendency of the above mentioned
case (G.R. No. L-21484), specifically on August
8, 1963, the President of the Philippines signed
into law the Agricultural Land Reform Code
(Republic Act No. 3844), which among other
things required the reorganization of the
administrative machinery of the Agricultural
Credit and Cooperative Financing
Administration (ACCFA) and changed its name
to Agricultural Credit Administration (ACA). On
March 17, 1964 the ACCFA Supervisors'
Association and the ACCFA Workers'
Association filed a petition for certification
election with the Court of Industrial Relations
(Case No. 1327-MC) praying that they be
certified as the exclusive bargaining agents for
the supervisors and rank-and-file employees,
respectively, in the ACA. The trial Court in its
order dated March 30, 1964 directed the
Manager or Officer-in-Charge of the ACA to
allow the posting of said order "for the
information of all employees and workers
thereof," and to answer the petition. In
compliance therewith, the ACA, while admitting
most of the allegations in the petition, denied
that the Unions represented the majority of the
supervisors and rank-and-file workers,
respectively, in the ACA. It further alleged that
the petition was premature, that the ACA was
not the proper party to be notified and to
answer the petition, and that the employees
and supervisors could not lawfully become
members of the Unions, nor be represented by
them. However, in a joint manifestation of the
Unions dated May 7, 1964, with the conformity
of the ACA Administrator and of the Agrarian
Counsel in his capacity as such and as counsel
for the National Land Reform Council, it was
agreed "that the union petitioners in this case
represent the majority of the employees in their
respective bargaining units" and that only the
legal issues raised would be submitted for the
resolution of the trial Court.
Finding the remaining grounds for ACA's
opposition to the petition to be without merit,
the trial Court in its order dated May 21, 1964
certified "the ACCFA Workers' Association and
the ACCFA Supervisors' Association as the sole
and exclusive bargaining representatives of the
rank-and-file employees and supervisors,
respectively, of the Agricultural Credit
Administration." Said order was affirmed by the
CIR en banc in its resolution dated August 24,
1964.
On October 2, 1964 the ACA filed in this Court a
petition for certiorari with urgent motion to
stay the CIR order of May 21, 1964. In a
resolution dated October 6, 1964, this Court
dismissed the petition for "lack of adequate
allegations," but the dismissal was later
reconsidered when the ACA complied with the
formal requirement stated in said resolution. As
prayed for, this Court ordered the CIR to stay
the execution of its order of May 21, 1964.
In this appeal, the ACA in effect challenges the
jurisdiction of the CIR to entertain the petition
of the Unions for certification election on the
ground that it (ACA) is engaged in governmental
functions. The Unions join the issue on this
single point, contending that the ACA forms
proprietary functions.
Under Section 3 of the Agricultural Land Reform
Code the ACA was established, among other
governmental agencies,1 to extend credit and
similar assistance to agriculture, in pursuance of
the policy enunciated in Section 2 as follows:
SEC. 2. Declaration of Policy. — It is the
policy of the State:
(1) To establish owner-cultivatorships
and the economic family-size farm as
the basis of Philippine agriculture and,
as a consequence, divert landlord
capital in agriculture to industrial
development;
(2) To achieve a dignified existence for
the small farmers free from pernicious
institutional restraints and practices;
(3) To create a truly viable social and
economic structure in agriculture
conducive to greater productivity and
higher farm incomes;
(4) To apply all labor laws equally and
without discrimination to both
industrial and agricultural wage
earners;
(5) To provide a more vigorous and
systematic land resettlement program
and public land distribution; and
(6) To make the small farmers more
independent, self-reliant and
responsible citizens, and a source of
genuine strength in our democratic
society.
The implementation of the policy thus
enunciated, insofar as the role of the ACA
therein is concerned, is spelled out in Sections
110 to 118, inclusive, of the Land Reform Code.
Section 110 provides that "the administrative
machinery of the ACCFA shall be reorganized to
enable it to align its activities with the
requirements and objective of this Code and
shall be known as the Agricultural Credit
Administration." Under Section 112 the sum of
P150,000,000 was appropriated out of national
funds to finance the additional credit functions
of the ACA as a result of the land reform
program laid down in the Code. Section 103
grants the ACA the privilege of rediscounting
with the Central Bank, the Development Bank
of the Philippines and the Philippine National
Bank. Section 105 directs the loaning activities
of the ACA "to stimulate the development of
farmers' cooperatives," including those
"relating to the production and marketing of
agricultural products and those formed to
manage and/or own, on a cooperative basis,
services and facilities, such as irrigation and
transport systems, established to support
production and/or marketing of agricultural
products." Section 106 deals with the extension
by ACA of credit to small farmers in order to
stimulate agricultural production. Sections 107
to 112 lay down certain guidelines to be
followed in connection with the granting of
loans, such as security, interest and supervision
of credit. Sections 113 to 118, inclusive, invest
the ACA with certain rights and powers not
accorded to non-governmental entities, thus:
SEC. 113. Auditing of Operations. — For
the effective supervision of farmers'
cooperatives, the head of the
Agricultural Credit Administration shall
have the power to audit their
operations, records and books of
account and to issue subpoena and
subpoena duces tecum to compel the
attendance of witnesses and the
production of books, documents and
records in the conduct of such audit or
of any inquiry into their affairs. Any
person who, without lawful cause, fails
to obey such subpoena or subpoena
duces tecum shall, upon application of
the head of Agricultural Credit
Administration with the proper court,
be liable to punishment for contempt in
the manner provided by law and if he is
an officer of the Association, to
suspension or removal from office.
SEC. 114. Prosecution of officials. — The
Agricultural Credit Administration,
through the appropriate provincial or
city fiscal, shall have the power to file
and prosecute any and all actions which
it may have against any and all officials
or employees of farmers' cooperatives
arising from misfeasance or
malfeasance in office.
SEC. 115. Free Notarial Service. — Any
justice of the peace, in his capacity as
notary ex-officio, shall render service
free of charge to any person applying
for a loan under this Code either in
administering the oath or in the
acknowledgment of instruments
relating to such loan.
SEC. 116. Free Registration of Deeds. —
Any register of deeds shall accept for
registration, free of charge any
instrument relative to a loan made
under this Code.
SEC. 117. Writing-off Unsecured and
Outstanding Loans. — Subject to the
approval of the President upon
recommendation of the Auditor
General, the Agricultural Credit
Administration may write-off from its
books, unsecured and outstanding
loans and accounts receivable which
may become uncollectible by reason of
the death or disappearance of the
debtor, should there be no visible
means of collecting the same in the
foreseeable future, or where the debtor
has been verified to have no income or
property whatsoever with which to
effect payment. In all cases, the writing-
off shall be after five years from the
date the debtor defaults.
SEC. 118. Exemption from Duties, Taxes
and Levies. — The Agricultural Credit
Administration is hereby exempted
from the payment of all duties, taxes,
levies, and fees, including docket and
sheriff's fees, of whatever nature or
kind, in the performance of its functions
and in the exercise of its powers
hereunder.
The power to audit the operations of farmers'
cooperatives and otherwise inquire into their
affairs, as given by Section 113, is in the nature
of the visitorial power of the sovereign, which
only a government agency specially delegated
to do so by the Congress may legally exercise.
On March 19, 1964 Executive Order No. 75 was
promulgated. It is entitled: "Rendering in Full
Force and Effect the Plan of Reorganization
Proposed by the Special Committee on
Reorganization of Agencies for Land Reform for
the Administrative Machinery of the
Agricultural Land Reform Code," and contains
the following pertinent provisions:
 Section 3. The Land Reform Project
Administration2 shall be considered a
single organization and the personnel
complement of the member agencies
including the legal officers of the Office
of the Agrarian Counsel which shall
provide legal services to the LRPA shall
be regarded as one personnel pool from
which the requirements of the
operations shall be drawn and subject
only to the civil service laws, rules and
regulations, persons from one agency
may be freely assigned to positions in
another agency within the LRPA when
the interest of the service so demands.
Section 4. The Land Reform Project
Administration shall be considered as
one organization with respect to the
standardization of job descriptions
position classification and wage and
salary structures to the end that
positions involving the same or
equivalent qualifications and equal
responsibilities and effort shall have the
same remuneration.
Section 5. The Civil Service laws, rules
and regulations with respect to
promotions, particularly in the
consideration of person next in rank,
shall be made applicable to the Land
Reform Project Administration as a
single agency so that qualified
individuals in one member agency must
be considered in considering promotion
to higher positions in another member
agency.
The implementation of the land reform
program of the government according to
Republic Act No. 3844 is most certainly a
governmental, not a proprietary, function; and
for that purpose Executive Order No. 75 has
placed the ACA under the Land Reform Project
Administration together with the other member
agencies, the personnel complement of all of
which are placed in one single pool and made
available for assignment from one agency to
another, subject only to Civil Service laws, rules
and regulations, position classification and
wage structures.
The appointing authority in respect of the
officials and employees of the ACA is the
President of the Philippines, as stated in a 1st
indorsement by his office to the Chairman of
the National Reform Council dated May 22,
1964, as follows:
Appointments of officials and
employees of the National Land Reform
Council and its agencies may be made
only by the President, pursuant to the
provisions of Section 79(D) of the
Revised Administrative Code. In
accordance with the policy and
practice, such appointments should be
prepared for the signature of the
Executive Secretary, "By Authority ofthe
President".3
When the Agricultural Reform Code was being
considered by the Congress, the nature of the
ACA was the subject of the following exposition
on the Senate floor:
Senator Tolentino: . . . . "The ACA is not
going to be a profit making institution.
It is supposed to be a public service of
the government to the lessees and
farmer-owners of the lands that may be
bought after expropriation from
owners. It is the government here that
is the lender. The government should
not exact a higher interest than what
we are telling a private landowner now
in his relation to his tenants if we give
to their farmers a higher rate of interest
. . . ." (pp. 17 & 18, Senate Journal No.
16, July 3, 1963)
The reason is obvious, to pinpoint responsibility
for many losses in the government, in order to
avoid irresponsible lending of government
money — to pinpoint responsibility for many
losses . . . .
Senator Manglapus: ". . . But assuming
that hypothesis, that is the reason why
we are appropriating P150,000,000.00
for the Agricultural Credit
Administration which will go to
intensified credit operations on the
barrio level . . ." (p. 3, Senate Journal
No. 7).
That it is the reason why we are providing for
the expansion of the ACCFA and the weeding
out of the cooperative activity of the ACCFA and
turning this over to the Agricultural Productivity
Commission, so that the Agricultural Credit
Administration will concentrate entirely on the
facilitation of credit on the barrio level with the
massive support of 150 million provided by the
government. . . . (pp. 4 & 5 of Senate Journal
No. 7, July 3, 1963)
. . . But by releasing them from this situation,
we feel that we are putting them in a much
better condition than that in which they are
found by providing them with a business-like
way of obtaining credit, not depending on a
paternalistic system but one which is business-
like — that is to say, a government office, which
on the barrio level will provide them that credit
directly . . . . (p. 40, Senate Journal No. 7, July 3,
1963) (emphasis supplied).
The considerations set forth above militate
quite strongly against the recognition of
collective bargaining powers in the respondent
Unions within the context of Republic Act No.
875, and hence against the grant of their basic
petition for certification election as proper
bargaining units. The ACA is a government
office or agency engaged in governmental, not
proprietary functions. These functions may not
be strictly what President Wilson described as
"constituent" (as distinguished from
4 the National Land Reform Council, itself a
"ministrant"), such as those relating to the
maintenance of peace and the prevention of
crime, those regulating property and property
rights, those relating to the administration of
justice and the determination of political duties
of citizens, and those relating to national
defense and foreign relations. Under this
traditional classification, such constituent
functions are exercised by the State as
attributes of sovereignty, and not merely to
promote the welfare, progress and prosperity
of the people — these letter functions being
ministrant he exercise of which is optional on
the part of the government.
The growing complexities of modern society,
however, have rendered this traditional
classification of the functions of government
quite unrealistic, not to say obsolete. The areas
which used to be left to private enterprise and
initiative and which the government was called
upon to enter optionally, and only "because it
was better equipped to administer for the
public welfare than is any private individual or
group of individuals,"5 continue to lose their
well-defined boundaries and to be absorbed
within activities that the government must
undertake in its sovereign capacity if it is to
meet the increasing social challenges of the
times. Here as almost everywhere else the
tendency is undoubtedly towards a greater
socialization of economic forces. Here of course
this development was envisioned, indeed
adopted as a national policy, by the
Constitution itself in its declaration of principle
concerning the promotion of social justice.
It was in furtherance of such policy that the
Land Reform Code was enacted and the various
agencies, the ACA among them, established to
carry out its purposes. There can be no dispute
as to the fact that the land reform program
contemplated in the said Code is beyond the
capabilities of any private enterprise to
translate into reality. It is a purely governmental
function, no less than, say, the establishment
and maintenance of public schools and public
hospitals. And when, aside from the
governmental objectives of the ACA, geared as
they are to the implementation of the land
reform program of the State, the law itself
declares that the ACA is a government office,
with the formulation of policies, plans and
programs vested no longer in a Board of
Governors, as in the case of the ACCFA, but in
government instrumentality; and that its
personnel are subject to Civil Service laws and
to rules of standardization with respect to
positions and salaries, any vestige of doubt as
to the governmental character of its functions
disappears.
In view of the foregoing premises, we hold that
the respondent Unions are not entitled to the
certification election sought in the Court below.
Such certification is admittedly for purposes of
bargaining in behalf of the employees with
respect to terms and conditions of
employment, including the right to strike as a
coercive economic weapon, as in fact the said
unions did strike in 1962 against the ACCFA
(G.R. No. L-21824).6 This is contrary to Section
11 of Republic Act No. 875, which provides:
SEC. 11. Prohibition Against Strike in the
Government — The terms and
conditions of employment in the
Government, including any political
subdivision or instrumentality thereof,
 are governed by law and it is declared
to be the policy of this Act that
employees therein shall not strike for
the purposes of securing changes or
modification in their terms and
conditions of employment. Such
employees may belong to any labor
organization which does not impose the
obligation to strike or to join in strike:
Provided, However, that this section
shall apply only to employees employed
in governmental functions of the
Government including but not limited
to governmental corporations.7
With the reorganization of the ACCFA and its
conversion into the ACA under the Land Reform
Code and in view of our ruling as to the
governmental character of the functions of the
ACA, the decision of the respondent Court
dated March 25, 1963, and the resolution en
banc affirming it, in the unfair labor practice
case filed by the ACCFA, which decision is the
subject of the present review in G. R. No. L-
21484, has become moot and academic,
particularly insofar as the order to bargain
collectively with the respondent Unions is
concerned.
What remains to be resolved is the question of
fringe benefits provided for in the collective
bargaining contract of September 4, 1961. The
position of the ACCFA in this regard is that the
said fringe benefits have not become
enforceable because the condition that they
should first be approved by the Office of the
President has not been complied with. The
Unions, on the other hand, contend that no
such condition existed in the bargaining
contract, and the respondent Court upheld this
contention in its decision.
It is to be listed that under Section 3, Article
XIV, of the agreement, the same "shall not
become effective unless and until the same is
duly ratified by the Board of Governors of the
Administration." Such approval was given even
before the formal execution of the agreement,
by virtue of "Resolution No. 67, Regular
Meeting No. 7, FY 1960-61, held on August 17,
1961," but with the proviso that "the fringe
benefits contained therein shall take effect only
if approved by the office of the President." The
condition is, therefore, deemed to be
incorporated into the agreement by reference.
On October 23, 1962 the Office of the
President, in a letter signed by the Executive
Secretary, expressed its approval of the
bargaining contract "provided the salaries and
benefits therein fixed are not in conflict with
applicable laws and regulations, are believed to
be reasonable considering the exigencies of the
service and the welfare of the employees, and
are well within the financial ability of the
particular corporation to bear."
On July 1, 1963 the ACCFA management and
the Unions entered into an agreement for the
implementation of the decision of the
respondent Court concerning the fringe
benefits, thus:
In the meantime, only Cost of Living
Adjustment, Longevity Pay, and Night
Differential Benefits accruing from July
1, 1961 to June 30, 1963 shall be paid to
all employees entitled thereto, in the
following manner:
A) The sum of P180,000 shall be set
aside for the payment of:
1) Night differential benefits for
Security Guards.
2) Cost of Living Adjustment and
Longevity Pay.
3) The unpaid balance due employees
on Item A (1) and (2) this paragraph
shall be paid in monthly installments as
finances permit but not beyond
December 20, 1963.
3. All benefits accruing after July 1,
1963, shall be allowed to accumulate
but payable only after all benefits
accruing up to June 30, 1963, as per CIR
decision hereinabove referred to shall
have been settled in full; provided,
however, that commencing July 1, 1963
and for a period of only two (2) months
thereafter (during which period the
ACCFA and the Unions shall negotiate a
new Collective Bargaining Agreement)
the provisions of the September 4, 1961
Collective Bargaining Agreement shall
be temporarily suspended, except as to
Cost of Living Adjustment and
 "political" or non-economic privileges
and benefits thereunder.
On July 24, 1963 the ACCFA Board of Governors
ratified the agreement thus entered into,
pursuant to the provision thereof requiring such
ratification, but with the express qualification
that the same was "without prejudice to the
pending appeal in the Supreme Court . . . in
Case No. 3450-ULP." The payment of the fringe
benefits agreed upon, to our mind, shows that
the same were within the financial capability of
the ACCFA then, and hence justifies the
conclusion that this particular condition
imposed by the Office of the President in its
approval of the bargaining contract was
satisfied.
We hold, therefore, that insofar as the fringe
benefits already paid are concerned, there is no
reason to set aside the decision of the
respondent Court, but that since the
respondent Unions have no right to the
certification election sought by them nor,
consequently, to bargain collectively with the
petitioner, no further fringe benefits may be
demanded on the basis of any collective
bargaining agreement.
The decisions and orders appealed from are set
aside and/or modified in accordance with the
foregoing pronouncements. No costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez,
Castro, Teehankee and Barredo, JJ., concur.
Zaldivar, J., concurs in the result.

Separate Opinions

FERNANDO, J., concurring:

The decision reached by this Court so ably given expression in the opinion of Justice Makalintal,
characterized with vigor, clarity and precision, represents what for me is a clear tendency not to be
necessarily bound by our previous pronouncements on what activities partake of a nature that is
governmental.1 Of even greater significance, there is a definite rejection of the "constituent-ministrant"
criterion of governmental functions, followed in Bacani v. National Coconut Corporation.2 That indeed is
cause for gratification. For me at least, there is again full adherence to the basic philosophy of the
Constitution as to the extensive and vast power lodged in our government to cope with the social and
economic problems that even now sorely beset us. There is therefore full concurrence on my part to the
opinion of the Court, distinguished by its high quality of juristic craftsmanship. I feel however that the
matter is of such vital importance that a separate concurring opinion is not inappropriate. It will also
serve to give expression to my view, which is that of the Court likewise, that our decision today does not
pass upon the rights of labor employed in instrumentalities of the state discharging governmental
functions.

1. In the above Bacani decision, governmental functions are classified into constituent and ministrant.
"The former are those which constitute the very bonds of society and are compulsory in nature; the
latter are those that are undertaken only by way of advancing the general interests of society, and are
merely optional. President Wilson enumerates the constituent functions as follows: '(1) The keeping of
order and providing for the protection of persons and property from violence and robbery. (2) The fixing
of the legal relations between man and wife and between parents and children. (3) The regulation of the
holding, transmission, and interchange of property, and the determination of its liabilities for debt or for
crime. (4) The determination of contract rights between individuals. (5) The definition and punishment
of crime. (6) The administration of justice in civil cases. (7) The determination of the political duties,
privileges, and relations of citizens. (8) Dealings of the state with foreign powers: the preservation of the
state from external danger or encroachment and the advancement of its international interests.' "3

The ministrant functions were then enumerated, followed by a statement of the basis that would justify
engaging in such activities. Thus: "The most important of the ministrant functions are: public works,
public education, public charity, health and safety regulations, and regulations of trade and industry.
The principles determining whether or not a government shall exercise certain of these optional
functions are: (1) that a government should do for the public welfare those things which private capital
would not naturally undertake and (2) that a government should do these things which by its very
nature it is better equipped to administer for the public welfare than is any private individual or group of
individuals."4

Reference is made in the Bacani decision to the first of the many publications of Justice Malcolm on the
Philippine government, which appeared in 1916,5 adopting the formulation of the then Professor, later
President, Woodrow Wilson of the United States, in a textbook on political science the first edition of
which was published in 1898. The Wilson classification reflected the primacy of the dominant laissez-
faire concept carried into the sphere of government.

A most spirited defense of such a view was given by former President Hadley of Yale in a series of three
lectures delivered at Oxford University in 1914. According to President Hadley: "I shall begin with a
proposition which may sound somewhat startling, but which I believe to be literally true. The whole
American political and social system is based on industrial property right, far more completely than has
ever been the case in any European country. In every nation of Europe there has been a certain amount
of traditional opposition between the government and the industrial classes. In the United States no
such tradition exists. In the public law of European communities industrial freeholding is a comparatively
recent development. In the United States, on the contrary, industrial freeholding is the foundation on
which the whole social order has been established and built up."6

The view is widely accepted that such a fundamental postulate did influence American court decisions
on constitutional law. As was explicitly stated by Justice Cardozo, speaking of that era: "Laissez-faire was
not only a counsel of caution which statesmen would do well to heed. It was a categorical imperative
which statesmen as well as judges, must obey."7 For a long time, legislation tending to reduce economic
inequality foundered on the rock that was the due process clause, enshrining as it did the liberty of
contract. To cite only one instance, the limitation of employment in bakeries to sixty hours a week and
ten hours a day under a New York statute was stricken down for being tainted with a due process
objection in Lochner v. New York.8 It provoked one of the most vigorous dissents of Justice Holmes, who
was opposed to the view that the United States Constitution did embodylaissez-faire. Thus: "General
propositions do not decide concrete cases. The decision will depend on a judgment or intuition more
subtle than any articulate major premise. But I think that the proposition just stated, if it is accepted, will
carry us far toward the end. Every opinion tends to become a law. I think that the word 'liberty,' in the
14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion,
unless it can be said that a rational and fair man necessarily would admit that the statute proposed
would infringe fundamental principles as they have been understood by the traditions of our people and
our law. It does not need research to show that no such sweeping condemnation can be passed upon
the statute before us. A reasonable man might think it a proper measure on the score of health. Men
whom I certainly could not pronounce unreasonable would uphold it as a first installment of a general
regulation of the hours of work. Whether in the latter aspect it would be open to the charge of
inequality I think it unnecessary to discuss." It was not until 1908, in Muller v. Oregon,9 that the
American Supreme Court held valid a ten-hour maximum for women workers in laundries and not until
1917 in Bunting v. Oregon10 that such a regulatory ten-hour law applied to men and women passed the
constitutional test.

Similarly, state legislation fixing minimum wages was deemed offensive to the due process clause in a
1923 decision in Adkins v. Children's Hospital.11 Only in 1937, in the leading case of West Coast Hotel v.
Parrish,12 was the Adkins case overruled and a minimum wage law New York statute upheld. The same
unsympathetic attitude arising from the laissez-faire concept was manifest in decisions during such
period, there being the finely-spun distinctions in the Wolff Packing Co. v. Court of Industrial
Relations13 decision, as to when certain businesses could be classified as affected with public interest to
justify state regulation as to prices. After eleven years, in 1934, in Nebbia v. New York,14 the air of
unreality was swept away by this explicit pronouncement from the United States Supreme Court: "The
phrase 'affected with a public interest' can, in the nature of things, mean no more than that an industry,
for adequate reason, is subject to control for the public good."

It is thus apparent that until the administration of President Roosevelt, the laissez-faire principle
resulted in the contraction of the sphere where governmental entry was permissible. The object was to
protect property even if thereby the needs of the general public would be left unsatisfied. This was
emphatically put forth in a work of former Attorney General, later Justice, Jackson, citing an opinion of
Judge Van Orsdel. Thus: "It should be remembered that of the three fundamental principles which
underlie government, and for which government exists, the protection of life, liberty, and property,
the chief of these is property . . . ."15 The above excerpt from Judge Van Orsdel forms part of his opinion
in Children's Hospital v. Adkins, when decided by the Circuit Court of Appeals.16

Nonetheless, the social and economic forces at work in the United States to which the new deal
administration of President Roosevelt was most responsive did occasion, as of 1937, greater receptivity
by the American Supreme Court to a philosophy less rigid in its obeisance to property rights. Earlier
legislation deemed offensive to thelaissez-faire concept had met a dismal fate. Their nullity during his
first term could, more often than not, be expected.17

As a matter of fact, even earlier, in 1935, Professor Coker of Yale, speaking as a historian, could already
discern a contrary drift. Even then he could assert that the range of governmental activity in the United
States had indeed expanded. According to him: "Thus both liberals and conservatives approve wide and
varied governmental intervention; the latter condemning it, it is true, when the former propose it, but
endorsing it, after it has become a fixed part of the status quo, as so beneficial in its effects that no more
of it is needed. Our history for the last half-century shows that each important governmental
intervention we have adopted has been called socialistic or communistic by contemporary
conservatives, and has later been approved by equally conservative men who now accept it both for its
proved benefits and for the worthy traditions it has come to represent. Both liberal and conservative
supporters of our large-scale business under private ownership advocate or concede the amounts and
kinds of governmental limitation and aid which they regard as necessary to make the system work
efficiently and humanely. Sooner or later, they are willing to have government intervene for the purpose
of preventing the system from being too oppressive to the masses of the people, protecting it from its
self-destructive errors, and coming to its help in other ways when it appears not to be able to take care
of itself."18

At any rate, by 1943, the United States was reconciled to laissez-faire having lost its dominance. In the
language of Justice Jackson in the leading case of West Virginia State Board of Education v.
Barnette:19 "We must transplant these rights to a soil in which the laissez-faire concept or principle of
non-interference has withered at least as to economic affairs, and social advancements are increasingly
sought through closer integration of society and through expanded and strengthened governmental
controls."

2. The influence exerted by American constitutional doctrines unavoidable when the Philippines was still
under American rule notwithstanding, an influence that has not altogether vanished even after
independence, thelaissez-faire principle never found full acceptance in this jurisdiction, even during the
period of its full flowering in the United States. Moreover, to erase any doubts, the Constitutional
Convention saw to it that our fundamental law embodies a policy of the responsibility thrust on
government to cope with social and economic problems and an earnest and sincere commitment to the
promotion of the general welfare through state action. It would thus follow that the force of any legal
objection to regulatory measures adversely affecting property rights or to statutes organizing public
corporations that may engage in competition with private enterprise has been blunted. Unless there be
a clear showing of any invasion of rights guaranteed by the Constitution, their validity is a foregone
conclusion. No fear need be entertained that thereby spheres hitherto deemed outside government
domain have been enchroached upon. With our explicit disavowal of the "constituent-ministrant" test,
the ghost of the laissez-faire concept no longer stalks the juridical stage.
As early as 1919, in the leading case of Rubi V. Provincial Board of Mindoro,20 Justice Malcolm already
had occasion to affirm: "The doctrines of laissez-faire and of unrestricted freedom of the individual, as
axioms of economic and political theory, are of the past. The modern period has shown a widespread
belief in the amplest possible demonstration of governmental activity. The Courts unfortunately have
sometimes seemed to trail after the other two branches of the Government in this progressive march."

It was to be expected then that when he spoke for the Court in Government of the Philippine Islands v.
Springer,21 a 1927 decision, he found nothing objectionable in the government itself organizing and
investing public funds in such corporations as the National Coal Co., the Phil. National Bank, the National
Petroleum Co., the National Development Co., the National Cement Co. and the National Iron Co. There
was not even a hint that thereby the laissez-faire concept was not honored at all. It is true that Justice
Malcolm concurred with the majority in People v. Pomar,22 a 1924 opinion, which held invalid under the
due process clause a provision providing for maternity leave with pay thirty days before and thirty days
after confinement. It could be that he had no other choice as the Philippines was then under the United
States, and only recently the year before, the above-cited case of Adkins v. Children's Hospital,23 in line
with the laissez-faire principle, did hold that a statute providing for minimum wages was constitutionally
infirm on the same ground.

Our constitution which took effect in 1935, upon the inauguration of the Commonwealth of the
Philippines, erased whatever doubts there might be on that score. Its philosophy is antithetical to
the laissez-faire concept. Delegate, later President, Manuel Roxas, one of the leading members of the
Constitutional Convention, in answer precisely to an objection of Delegate Jose Reyes of Sorsogon, who
noted the "vast extensions in the sphere of governmental functions" and the "almost unlimited power
to interfere in the affairs of industry and agriculture as well as to compete with existing business" as
"reflections of the fascination exerted by [the then] current tendencies" in other jurisdictions,24 spoke
thus: "My answer is that this constitution has a definite and well defined philosophy, not only political
but social and economic. A constitution that in 1776 or in 1789 was sufficient in the United States,
considering the problems they had at that time, may not now be sufficient with the growing and ever-
widening complexities of social and economic problems and relations. If the United States of America
were to call a constitutional convention today to draft a constitution for the United States, does any one
doubt that in the provisions of that constitution there will be found definite declarations of policy as to
economic tendencies; that there will be matters which are necessary in accordance with the experience
of the American people during these years when vast organizations of capital and trade have succeeded
to a certain degree to control the life and destiny of the American people? If in this constitution the
gentleman will find declarations of economic policy, they are there because they are necessary to
safeguard the interests and welfare of the Filipino people because we believe that the days have come
when in self-defense, a nation may provide in its constitution those safeguards, the patrimony, the
freedom to grow, the freedom to develop national aspirations and national interests, not to be
hampered by the artificial boundaries which a constitutional provision automatically imposes."25

Delegate Roxas continued further: "The government is the creature of the people and the government
exercises its powers and functions in accordance with the will and purposes of the people. That is the
first principle, the most important one underlying this document. Second, the government established in
this document is, in its form, in our opinion, the most adapted to prevailing conditions, circumstances
and the political outlook of the Filipino people. Rizal said, 'Every people has the kind of government that
they deserve.' That is just another form of expressing the principle in politics enunciated by the French
philosophers when they said: 'Every people has the right to establish the form of government which
they believe is most conducive to their welfare and their liberty.' Why have we preferred the
government that is established in this draft? Because it is the government with which we are familiar. It
is the form of government fundamentally such as it exists today; because it is the only kind of
government that our people understand; it is the kind of government we have found to be in
consonance with our experience, with the necessary modification, capable of permitting a fair play of
social forces and allowing the people to conduct the affairs of that government."26
One of the most prominent delegates, a leading intellectual, former President Rafael Palma of the
University of the Philippines, stressed as a fundamental principle in the draft of the Constitution the
limitation on the right to property. He pointed out that the then prevailing view allowed the
accumulation of wealth in one family down to the last remote descendant, resulting in a grave
disequilibrium and bringing in its wake extreme misery side by side with conspicuous luxury. He did
invite attention to the few millionaires at one extreme with the vast masses of Filipinos deprived of the
necessities of life at the other. He asked the Convention whether the Filipino people could long remain
indifferent to such a deplorable situation. For him to speak of a democracy under such circumstances
would be nothing but an illusion. He would thus emphasize the urgent need to remedy the grave social
injustice that had produced such widespread impoverishment, thus recognizing the vital role of
government in this sphere.27

Another delegate, Tomas Confesor of Iloilo, was quite emphatic in his assertion for the need of a social
justice provision which is a departure from the laissez-faire principle. Thus: "Take the case of the
tenancy system in the Philippines. You have a tenant. There are hundreds of thousands of tenants
working day in and day out, cultivating the fields of their landlords. He puts all his time, all his energy,
the labor and the assistance of his wife and children, in cultivating a piece of ground for his landlord but
when the time comes for the partition of the products of his toil what happens? If he produces
25 cavanes of rice, he gets only perhaps five and the twenty goes to the landlord. Now can he go to
court? Has he a chance to go to court in order to secure his just share of the products of his toil? No.
Under our present regime of law, under our present regime of justice, you do not give that to the poor
tenant. Gentlemen, you go to the Cagayan Valley and see the condition under which those poor farmers
are being exploited day in and day out. Can they go to court under our present regime of justice, of
liberty, or democracy? The other day, workmen were shot by the police just because they wanted to
increase or they desired that their wages be increased from thirty centavos a day to forty or fifty
centavos. Is it necessary to spill human blood just to secure an increase of ten centavos in the daily
wages of an ordinary laborer? And yet under our present regime of social justice, liberty and democracy,
these things are happening; these things, I say, are happening. Are those people getting any justice? No.
They cannot get justice now from our courts. For this reason, I say it is necessary that we insert 'social
justice' here and that social justice must be established by law. Proper legal provisions, proper legal
facilities must be provided in order that there be a regime not of justice alone, because we have that
now and we are seeing the oppression arising from such a regime. Consequently, we must emphasize
the term 'social justice'."28

Delegate Ventenilla of Pangasinan reflected the attitude of the Convention as to why laissez-faire was
no longer acceptable. After speaking of times having changed, he proceeded: "Since then new problems
have arisen. The spiritual mission of government has descended to the level of the material. Then its
function was primarily to soothe the aching spirit. Now, it appears, it must also appease hunger. Now
that we may read history backwards, we know for instance, that the old theory of 'laissez-faire' has
degenerated into 'big business affairs' which are gradually devouring the rights of the people — the
same rights intended to be guarded and protected by the system of constitutional guaranties. Oh, if the
Fathers were now alive to see the changes that the centuries have wrought in our life! They might
contemplate the sad spectacle of organized exploitation greedily devouring the previous rights of the
individual. They might also behold the gradual disintegration of society, the fast disappearance of the
bourgeois — the middle class, the backbone of the nation — and the consequent drifting of the classes
toward the opposite extremes — the very rich and the very poor."29

Shortly after the establishment of the Commonwealth, the then Justice Jose P. Laurel, himself one of the
foremost delegates of the Constitutional Convention, in a concurring opinion, later quoted with
approval in the leading case of Antamok Goldfields Mining Co. v. Court of Industrial Relations,30 decided
in 1940, explained clearly the need for the repudiation of the laissez-faire doctrine. Thus: "It should be
observed at the outset that our Constitution was adopted in the midst of surging unrest and
dissatisfaction resulting from economic and social distress which was threatening the stability of
governments the world over. Alive to the social and economic forces at work, the framers of our
Constitution boldly met the problems and difficulties which faced them and endeavored to crystallize,
with more or less fidelity, the political, social and economic propositions of their age, and this they did,
with the consciousness that the political and philosophical aphorism of their generation will, in the
language of a great jurist, 'be doubted by the next and perhaps entirely discarded by the third.' . . .
Embodying the spirit of the present epoch, general provisions were inserted in the Constitution which
are intended to bring about the needed social and economic equilibrium between component elements
of society through the application of what may be termed as the justitia communis advocated by Grotius
and Leibnits many years ago to be secured through the counterbalancing of economic and social forces
and opportunities which should be regulated, if not controlled, by the State or placed, as it were,
in custodia societatis. 'The promotion of social justice to insure the well-being and economic security of
all the people' was thus inserted as vital principle in our Constitution. ... ."31 In the course of such
concurring opinion and after noting the changes that have taken place stressing that the policy
of laissez-faire had indeed given way to the assumption by the government of the right to intervene
although qualified by the phrase "to some extent", he made clear that the doctrine in People v.
Pomar no longer retain, "its virtuality as a living principle."32

3. It must be made clear that the objection to the "constituent-ministrant" classification of

governmental functions is not to its formulation as such. From the standpoint of law as logic, it is not
without merit. It has neatness and symmetry. There are hardly any loose ends. It has the virtue of
clarity. It may be said in its favor likewise that it reflects all-too-faithfully the laissez-faire notion that
government cannot extend its operation outside the maintenance of peace and order, protection
against external security, and the administration of justice, with private rights, especially so in the case
of property, being safeguarded and a hint that the general welfare is not to be entirely ignored.

It must not be lost sight of though that logic and jural symmetry while undoubtedly desirable are not the
prime consideration. This is especially so in the field of public law. What was said by Holmes, almost
nine decades ago, carry greater conviction now. "The life of the law has not been logic; it has been
experience. The felt necessities of the time, the prevalent moral and political theories, intuitions of
public policy avowed or unconscious, even the prejudices which judges share with their fellow-men,
have had a good deal more to do than the syllogism in determining the rules by which men should be
governed."33 Then too, there was the warning of Geny cited by Cardozo that undue stress or logic may
result in confining the entire system of positive law, "within a limited number of logical categories,
predetermined in essence, immovable in basis, governed by inflexible dogmas," thus rendering it
incapable of responding to the ever varied and changing exigencies of life.34,

It is cause enough for concern if the objection to the Bacani decision were to be premised on the score
alone that perhaps there was fidelity to the requirements of logic and jural symmetry carried to excess.
What appears to me much more deplorable is that it did fail to recognize that there was a repudiation of
the laissez-faire concept in the Constitution. As was set forth in the preceding pages, the Constitution is
distinguished precisely by a contrary philosophy. The regime of liberty if provided for, with the
realization that under the then prevalent social and economic conditions, it may be attained only
through a government with its sphere of activity ranging far and wide, not excluding matters hitherto
left to the operation of free enterprise. As rightfully stressed in our decision today in line with what was
earlier expressed by Justice Laurel, the government that we have established has as a fundamental
principle the promotion of social justice.35 The same jurist gave it a comprehensive and enduring
definition as the "promotion of the welfare of all the people, the adoption by the government of
measures calculated to insure economic stability of all the component elements of society, through the
maintenance of a proper economic and social equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the existence of all governments in the time
honored principle of salus populi estsuprema lex."36

There is thus from the same distinguished pen, this time writing for the Court, a reiteration of the view
of thelaissez-faire doctrine being repugnant to the fundamental law. It must be added though that the
reference to extra-constitutional measures being allowable must be understood in the sense that there
is no infringement of specific constitutional guarantees. Otherwise, the judiciary will be hard put to
sustain their validity if challenged in an appropriate legal proceeding.

The regime of liberty contemplated in the Constitution with social justice as a fundamental principle to
reinforce the pledge in the preamble of promoting the general welfare reflects traditional concepts of a
democratic policy infused with an awareness of the vital and pressing need for the government to
assume a much more active and vigorous role in the conduct of public affairs. The framers of our
fundamental law were as one in their strongly-held belief that thereby the grave and serious infirmity
then confronting our body-politic, on the whole still with us now, of great inequality of wealth and mass
poverty, with the great bulk of our people ill-clad, ill-housed, ill-fed, could be remedied. Nothing else
than communal effort, massive in extent and earnestly engaged in, would suffice.

To paraphrase Laski, with the necessary modification in line with such worthy constitutional ends, we
look upon the state as an organization to promote the happiness of individuals, its authority as a power
bound by subordination to that purpose, liberty while to be viewed negatively as absence of restraint
impressed with a positive aspect as well to assure individual self-fulfillment in the attainment of which
greater responsibility is thrust on government; and rights as boundary marks defining areas outside its
domain.37 From which it would follow as Laski so aptly stated that it is the individual's "happiness and
not its well-being [that is] the criterion by which its behavior [is] to be judged. His interests, and not its
power, set the limits to the authority it [is] entitled to exercise."38 We have under such a test enlarged
its field of competence. 4. With the decision reached by us today, the government is freed from the
compulsion exerted by the Bacani doctrine of the "constituent-ministrant" test as a criterion for the type
of activity in which it may engage. Its constricting effect is consigned to oblivion. No doubts or misgivings
need assail us that governmental efforts to promote the public weal, whether through regulatory
legislation of vast scope and amplitude or through the undertaking of business activities, would have to
face a searching and rigorous scrutiny. It is clear that their legitimacy cannot be challenged on the
ground alone of their being offensive to the implications of the laissez-faire concept. Unless there be a
repugnancy then to the limitations expressly set forth in the Constitution to protect individual rights, the
government enjoys a much wider latitude of action as to the means it chooses to cope with grave social
and economic problems that urgently press for solution. For me, at least, that is to manifest deference
to the philosophy of our fundamental law. Hence my full concurrence, as announced at the outset.

5. The opinion of Justice Makalintal contains this footnote: "It must be stated, however, that we do not
here decide the question — not at issue in this case — of whether or not a labor organization composed
employees discharging governmental functions, which is allowed under the legal provision just quoted,
provided such organization does not impose the obligation to strike or to join in strike, may petition for
a certification election and compel the employer to bargain collectively with it for purposes other than
to secure changes or conditions in the terms and conditions of employment."

With such an affirmation as to the scope of our decision there being no holding on the vexing question
of the effects on the rights of labor in view of the conclusion reached that the function engaged in is
governmental in character, I am in full agreement. The answer to such a vital query must await another
day.

G.R. No. 74930 February 13, 1989

RICARDO VALMONTE, OSWALDO CARBONELL, DOY DEL CASTILLO, ROLANDO BARTOLOME, LEO
OBLIGAR, JUN GUTIERREZ, REYNALDO BAGATSING, JUN "NINOY" ALBA, PERCY LAPID, ROMMEL
CORRO and ROLANDO FADUL, petitioners,
vs.
FELICIANO BELMONTE, JR., respondent.

Ricardo C. Valmonte for and in his own behalf and his co-petitioners.
The Solicitor General for respondent.

CORTES, J.:
Petitioners in this special civil action for was one of those aforesaid
mandamus with preliminary injunction invoke MPs. Likewise, may we be
their right to information and pray that furnished with the certified true
respondent be directed: copies of the documents
evidencing their loan. Expenses
(a) to furnish in connection herewith shall be
petitioners the borne by us.
list of the
names of the If we could not secure the
Batasang above documents could we
Pambansa have access to them?
members
belonging to We are premising the above
the UNIDO and request on the following
PDP-Laban who provision of the Freedom
were able to Constitution of the present
secure clean regime.
loans
immediately The right of the
before the people to
February 7 information on
election thru matters of
the public concern
intercession/m shall be
arginal note of recognized.
the then First Access to
Lady Imelda official records,
Marcos; and/or and to
documents and
(b) to furnish papers
petitioners with pertaining to
certified true official acts,
copies of the transactions or
documents decisions, shall
evidencing their be afforded the
respective citizen subject
loans; and/or to such
limitation as
(c) to allow may be
petitioners provided by
access to the law. (Art. IV,
public records Sec. 6).
for the subject
information. We trust that within five (5)
(Petition, pp. 4- days from receipt hereof we
5; paragraphing will receive your favorable
supplied.] response on the matter.

The controversy arose when petitioner
Valmonte wrote respondent Belmonte the
following letter:
June 4, 1986
Hon. Feliciano Belmonte
GSIS General Manager
Arroceros, Manila
Sir:
As a lawyer, member of the
media and plain citizen of our
Republic, I am requesting that I
be furnished with the list of
names of the opposition
members of (the) Batasang
Pambansa who were able to
secure a clean loan of P2 million
each on guarranty (sic) of Mrs.
Imelda Marcos. We understand
that OIC Mel Lopez of Manila
To the aforesaid letter, the Deputy General
Counsel of the GSIS replied:
June 17, 1986
Atty. Ricardo C. Valmonte
108 E. Benin Street
Caloocan City
Dear Compañero:
Possibly because he must have
thought that it contained
serious legal implications,
President & General Manager
Feliciano Belmonte, Jr. referred
to me for study and reply your
letter to him of June 4, 1986
requesting a list of the
opposition members of
Batasang Pambansa who were
able to secure a clean loan of
 P2 million each on guaranty of
Mrs. Imelda Marcos.
My opinion in this regard is that
a confidential relationship
exists between the GSIS and all
those who borrow from it,
whoever they may be; that the
GSIS has a duty to its customers
to preserve this confidentiality;
and that it would not be proper
for the GSIS to breach this
confidentiality unless so
ordered by the courts.
As a violation of this
confidentiality may mar the
image of the GSIS as a
reputable financial institution, I
regret very much that at this
time we cannot respond
positively to your request.
Very truly yours,
(Sgd.) MEYNARDO A. TIRO
Deputy General Counsel
[Rollo, p. 40.]
On June 20, 1986, apparently not having yet
received the reply of the Government Service
and Insurance System (GSIS) Deputy General
Counsel, petitioner Valmonte wrote respondent
another letter, saying that for failure to receive
a reply, "(W)e are now considering ourselves
free to do whatever action necessary within the
premises to pursue our desired objective in
pursuance of public interest." [Rollo, p. 8.]
On June 26, 1986, Valmonte, joined by the
other petitioners, filed the instant suit.
On July 19, 1986, the Daily Express carried a
news item reporting that 137 former members
of the defunct interim and regular Batasang
Pambansa, including ten (10) opposition
members, were granted housing loans by the
GSIS [Rollo, p. 41.]
Separate comments were filed by respondent
Belmonte and the Solicitor General. After
petitioners filed a consolidated reply, the
petition was given due course and the parties
were required to file their memoranda. The
parties having complied, the case was deemed
submitted for decision.
In his comment respondent raises procedural
objections to the issuance of a writ of
mandamus, among which is that petitioners
have failed to exhaust administrative remedies.
Respondent claims that actions of the GSIS
General Manager are reviewable by the Board
of Trustees of the GSIS. Petitioners, however,
did not seek relief from the GSIS Board of
Trustees. It is therefore asserted that since
administrative remedies were not exhausted,
then petitioners have no cause of action.
To this objection, petitioners claim that they
have raised a purely legal issue, viz., whether or
not they are entitled to the documents sought,
by virtue of their constitutional right to
information. Hence, it is argued that this case
falls under one of the exceptions to the
principle of exhaustion of administrative
remedies.
Among the settled principles in administrative
law is that before a party can be allowed to
resort to the courts, he is expected to have
exhausted all means of administrative redress
available under the law. The courts for reasons
of law, comity and convenience will not
entertain a case unless the available
administrative remedies have been resorted to
and the appropriate authorities have been
given opportunity to act and correct the errors
committed in the administrative forum.
However, the principle of exhaustion of
administrative remedies is subject to settled
exceptions, among which is when only a
question of law is involved [Pascual v. Provincial
Board, 106 Phil. 466 (1959); Aguilar v. Valencia,
et al., G.R. No. L-30396, July 30, 1971, 40 SCRA
210; Malabanan v. Ramento, G.R. No. L-2270,
May 21, 1984, 129 SCRA 359.] The issue raised
by petitioners, which requires the
interpretation of the scope of the constitutional
right to information, is one which can be passed
upon by the regular courts more competently
than the GSIS or its Board of Trustees, involving
as it does a purely legal question. Thus, the
exception of this case from the application of
the general rule on exhaustion of administrative
remedies is warranted. Having disposed of this
procedural issue, We now address ourselves to
the issue of whether or not mandamus hes to
compel respondent to perform the acts sought
by petitioners to be done, in pursuance of their
right to information.
We shall deal first with the second and third
alternative acts sought to be done, both of
which involve the issue of whether or not
petitioners are entitled to access to the
documents evidencing loans granted by the
GSIS.
This is not the first time that the Court is
confronted with a controversy directly involving
the constitutional right to information.
In Tañada v. Tuvera, G.R. No. 63915, April
24,1985, 136 SCRA 27 and in the recent case
of Legaspi v. Civil Service Commission, G.R. No.
72119, May 29, 1987,150 SCRA 530, the Court
upheld the people's constitutional right to be
informed of matters of public interest and
ordered the government agencies concerned to
act as prayed for by the petitioners.
The pertinent provision under the 1987
Constitution is Art. 111, Sec. 7 which states:
The right of the people to
information on matters of
public concern shall be
recognized. Access to official
records, and to documents, and
papers pertaining to official
 acts, transactions, or decisions,
as well as to government
research data used as basis for
policy development, shall be
afforded the citizen, subject to
such limitations as may be
provided by law.
The right of access to information was also
recognized in the 1973 Constitution, Art. IV Sec.
6 of which provided:
The right of the people to
information on 'matters of
public concern shall be
recognized. Access to official
records, and to documents and
papers pertaining to official
acts, transactions, or decisions,
shall be afforded the citizen
subject to such limitations as
may be provided by law.
An informed citizenry with access to the diverse
currents in political, moral and artistic thought
and data relative to them, and the free
exchange of ideas and discussion of issues
thereon, is vital to the democratic government
envisioned under our Constitution. The
cornerstone of this republican system of
government is delegation of power by the
people to the State. In this system,
governmental agencies and institutions operate
within the limits of the authority conferred by
the people. Denied access to information on the
inner workings of government, the citizenry can
become prey to the whims and caprices of
those to whom the power had been delegated.
The postulate of public office as a public trust,
institutionalized in the Constitution (in Art. XI,
Sec. 1) to protect the people from abuse of
governmental power, would certainly be were
empty words if access to such information of
public concern is denied, except under
limitations prescribed by implementing
legislation adopted pursuant to the
Constitution.
Petitioners are practitioners in media. As such,
they have both the right to gather and the
obligation to check the accuracy of information
the disseminate. For them, the freedom of the
press and of speech is not only critical, but vital
to the exercise of their professions. The right of
access to information ensures that these
freedoms are not rendered nugatory by the
government's monopolizing pertinent
information. For an essential element of these
freedoms is to keep open a continuing dialogue
or process of communication between the
government and the people. It is in the interest
of the State that the channels for free political
discussion be maintained to the end that the
government may perceive and be responsive to
the people's will. Yet, this open dialogue can be
effective only to the extent that the citizenry is
informed and thus able to formulate its will
intelligently. Only when the participants in the
discussion are aware of the issues and have
access to information relating thereto can such
bear fruit.
The right to information is an essential premise
of a meaningful right to speech and expression.
But this is not to say that the right to
information is merely an adjunct of and
therefore restricted in application by the
exercise of the freedoms of speech and of the
press. Far from it. The right to information goes
hand-in-hand with the constitutional policies
of full public disclosure * and honesty in the
public service. ** It is meant to enhance the
widening role of the citizenry in governmental
decision-making as well as in checking abuse in
government.
Yet, like all the constitutional guarantees, the
right to information is not absolute. As stated
in Legaspi, the people's right to information is
limited to "matters of public concern," and is
further "subject to such limitations as may be
provided by law." Similarly, the State's policy of
full disclosure is limited to "transactions
involving public interest," and is "subject to
reasonable conditions prescribed by law."
Hence, before mandamus may issue, it must be
clear that the information sought is of "public
interest" or "public concern," and is not
exempted by law from the operation of the
constitutional guarantee [Legazpi v. Civil Service
Commission, supra, at p. 542.]
The Court has always grappled with the
meanings of the terms "public interest" and
"public concern". As observed in Legazpi:
In determining whether or not a
particular information is of
public concern there is no rigid
test which can be applied.
"Public concern" like "public
interest" is a term that eludes
exact definition. Both terms
embrace a broad spectrum of
subjects which the public may
want to know, either because
these directly affect their lives,
or simply because such matters
naturally arouse the interest of
an ordinary citezen. In the final
analysis, it is for the courts to
determine on a case by case
basis whether the matter at
issue is of interest or
importance, as it relates to or
affects the public. [Ibid. at p.
541]
In the Tañada case the public concern deemed
covered by the constitutional right to
information was the need for adequate notice
to the public of the various laws which are to
regulate the actions and conduct of citezens.
InLegaspi, it was the "legitimate concern of
citezensof ensure that government positions
requiring civil service eligibility are occupied
only by persons who are eligibles" [Supra at p.
539.]
The information sought by petitioners in this
case is the truth of reports that certain
Members of the Batasang Pambansa belonging
to the opposition were able to secure "clean"
loans from the GSIS immediately before the
February 7, 1986 election through the
intercession of th eformer First Lady, Mrs.
Imelda Marcos.
The GSIS is a trustee of contributions from the
government and its employees and the
administrator of various insurance programs for
the benefit of the latter. Undeniably, its funds
assume a public character. More particularly,
Secs. 5(b) and 46 of P.D. 1146, as amended (the
Revised Government Service Insurance Act of
1977), provide for annual appropriations to pay
the contributions, premiums, interest and other
amounts payable to GSIS by the government, as
employer, as well as the obligations which the
Republic of the Philippines assumes or
guarantees to pay. Considering the nature of its
funds, the GSIS is expected to manage its
resources with utmost prudence and in strict
compliance with the pertinent laws or rules and
regulations. Thus, one of the reasons that
prompted the revision of the old GSIS law (C.A.
No. 186, as amended) was the necessity "to
preserve at all times the actuarial solvency of
the funds administered by the System" [Second
Whereas Clause, P.D. No. 1146.] Consequently,
as respondent himself admits, the GSIS "is not
supposed to grant 'clean loans.'" [Comment, p.
8.] It is therefore the legitimate concern of the
public to ensure that these funds are managed
properly with the end in view of maximizing the
benefits that accrue to the insured government
employees. Moreover, the supposed borrowers
were Members of the defunct Batasang
Pambansa who themselves appropriated funds
for the GSIS and were therefore expected to be
the first to see to it that the GSIS performed its
tasks with the greatest degree of fidelity and
that an its transactions were above board.
In sum, the public nature of the loanable funds
of the GSIS and the public office held by the
alleged borrowers make the information sought
clearly a matter of public interest and concern.
A second requisite must be met before the right
to information may be enforced through
mandamus proceedings,viz., that the
information sought must not be among those
excluded by law.
Respondent maintains that a confidential
relationship exists between the GSIS and its
borrowers. It is argued that a policy of
confidentiality restricts the indiscriminate
dissemination of information.
Yet, respondent has failed to cite any law
granting the GSIS the privilege of confidentiality
as regards the documents subject of this
petition. His position is apparently based merely
on considerations of policy. The judiciary does
not settle policy issues. The Court can only
declare what the law is, and not what the law
should be. Under our system of government,
policy issues are within the domain of the
political branches of the government, and of
the people themselves as the repository of all
State power.
Respondent however contends that in view of
the right to privacy which is equally protected
by the Constitution and by existing laws, the
documents evidencing loan transactions of the
GSIS must be deemed outside the ambit of the
right to information.
There can be no doubt that right to privacy is
constitutionally protected. In the landmark case
of Morfe v. Mutuc[130 Phil. 415 (1968), 22 SCRA
424], this Court, speaking through then Mr.
Justice Fernando, stated:
... The right to privacy as such is
accorded recognition
independently of its
identification with liberty; in
itself, it is fully deserving of
constitutional protection. The
language of Prof. Emerson is
particularly apt: "The concept
of limited government has
always included the idea that
governmental powers stop
short of certain intrusions into
the personal life of the citizen.
This is indeed one of the basic
distinctions between absolute
and limited government.
UItimate and pervasive control
of the individual, in all aspects
of his life, is the hallmark of the
absolute. state, In contrast, a
system of limited government
safeguards a private sector,
which belongs to the individual,
firmly distinguishing it from the
public sector, which the state
can control. Protection of this
private sector — protection, in
other words, of the dignity and
integrity of the individual — has
become increasingly important
as modem society has
developed. All the forces of
technological age —
industrialization, urbanization,
and organization — operate to
narrow the area of privacy and
facilitate intrusion into it. In
modern terms, the capacity to
maintain and support this
enclave of private life marks the
difference between a
democratic and a totalitarian
society." [at pp. 444-445.]
When the information requested from the
government intrudes into the privacy of a
citizen, a potential conflict between the rights
to information and to privacy may arise.
However, the competing interests of these
rights need not be resolved in this case.
Apparent from the above-quoted statement of
the Court in Morfe is that the right to privacy
belongs to the individual in his private capacity,
and not to public and governmental agencies
like the GSIS. Moreover, the right cannot be
invoked by juridical entities like the GSIS. As
held in the case of Vassar College v. Loose Wills
Biscuit Co. [197 F. 982 (1912)], a corporation
has no right of privacy in its name since the It is argued that the records of the GSIS, a
entire basis of the right to privacy is an injury to government corporation performing
the feelings and sensibilities of the party and a proprietary functions, are outside the coverage
corporation would have no such ground for of the people's right of access
relief. to official records.

Neither can the GSIS through its General
Manager, the respondent, invoke the right to
privacy of its borrowers. The right is purely
personal in nature [Cf. Atkinson v. John Doherty
& Co., 121 Mich 372, 80 N.W. 285, 46 L.RA. 219
(1899); Schuyler v. Curtis, 147 N.Y. 434, 42 N.E.
22, 31 L.R.A. 286 (1895)), and hence may be
invoked only by the person whose privacy is
claimed to be violated.
It may be observed, however, that in the instant
case, the concerned borrowers themselves may
not succeed if they choose to invoke their right
to privacy, considering the public offices they
were holding at the time the loans were alleged
to have been granted. It cannot be denied that
because of the interest they generate and their
newsworthiness, public figures, most especially
those holding responsible positions in
government, enjoy a more limited right to
privacy as compared to ordinary individuals,
their actions being subject to closer public
scrutiny [Cf.Ayer Productions Pty. Ltd. v.
Capulong, G.R. Nos. 82380 and 82398, April 29,
1988; See also Cohen v. Marx, 211 P. 2d 321
(1949).]
Respondent next asserts that the documents
evidencing the loan transactions of the GSIS
are private in nature and hence, are not
covered by the Constitutional right to
information on matters of public concern which
guarantees "(a)ccess to official records, and to
documents, and papers pertaining
to official acts, transactions, or decisions" only.
It is further contended that since the loan
function of the GSIS is merely incidental to its
insurance function, then its loan transactions
are not covered by the constitutional policy of
full public disclosure and the right to
information which is applicable only to "official"
transactions.
First of all, the "constituent — ministrant"
dichotomy characterizing government function
has long been repudiated. In ACCFA v.
Confederation of Unions and Government
Corporations and Offices (G.R. Nos. L-21484 and
L-23605, November 29, 1969, 30 SCRA 6441,
the Court said that the government, whether
carrying out its sovereign attributes or running
some business, discharges the same function of
service to the people.
Consequently, that the GSIS, in granting the
loans, was exercising a proprietary function
would not justify the exclusion of the
transactions from the coverage and scope of
the right to information.
Moreover, the intent of the members of the
Constitutional Commission of 1986, to include
government-owned and controlled
corporations and transactions entered into by
them within the coverage of the State policy of
fun public disclosure is manifest from the
records of the proceedings:

xxx xxx xxx

THE PRESIDING OFFICER (Mr. Colayco).

Commissioner Suarez is recognized.

MR. SUAREZ. Thank you. May I ask the Gentleman a few question?

MR. OPLE. Very gladly.

MR. SUAREZ. Thank you.

When we declare a "policy of full public disclosure of all its transactions"

— referring to the transactions of the State — and when we say the
"State" which I suppose would include all of the various agencies,
departments, ministries and instrumentalities of the government....

MR. OPLE. Yes, and individual public officers, Mr. Presiding Officer.

MR. SUAREZ. Including government-owned and controlled corporations.

MR. OPLE. That is correct, Mr. Presiding Officer.

MR. SUAREZ. And when we say "transactions" which

should be distinguished from contracts, agreements, or
treaties or whatever, does the Gentleman refer to the
steps leading to the consummation of the contract, or
does he refer to the contract itself?
 MR. OPLE. The "transactions" used here I suppose is
generic and, therefore, it can cover both steps leading to
a contract, and already a consummated contract, Mr.
Presiding Officer.

MR. SUAREZ. This contemplates inclusion of

negotiations leading to the consummation of the
transaction.

MR. OPLE. Yes, subject only to reasonable safeguards

on the national interest.

MR. SUAREZ. Thank you. [V Record of the Constitutional

Commission 24-25.] (Emphasis supplied.)

Considering the intent of the framers of the Constitution which, though not binding upon the Court, are
nevertheless persuasive, and considering further that government-owned and controlled corporations,
whether performing proprietary or governmental functions are accountable to the people, the Court is
convinced that transactions entered into by the GSIS, a government-controlled corporation created by
special legislation are within the ambit of the people's right to be informed pursuant to the
constitutional policy of transparency in government dealings.

In fine, petitioners are entitled to access to the documents evidencing loans granted by the GSIS, subject
to reasonable regulations that the latter may promulgate relating to the manner and hours of
examination, to the end that damage to or loss of the records may be avoided, that undue interference
with the duties of the custodian of the records may be prevented and that the right of other persons
entitled to inspect the records may be insured [Legaspi v. Civil Service Commission, supra at p. 538,
quoting Subido v. Ozaeta, 80 Phil. 383, 387.] The petition, as to the second and third alternative acts
sought to be done by petitioners, is meritorious.

However, the same cannot be said with regard to the first act sought by petitioners, i.e., "to furnish
petitioners the list of the names of the Batasang Pambansa members belonging to the UNIDO and PDP-
Laban who were able to secure clean loans immediately before the February 7 election thru the
intercession/marginal note of the then First Lady Imelda Marcos."

Although citizens are afforded the right to information and, pursuant thereto, are entitled to "access to
official records," the Constitution does not accord them a right to compel custodians of official records
to prepare lists, abstracts, summaries and the like in their desire to acquire information on matters of
public concern.

It must be stressed that it is essential for a writ of mandamus to issue that the applicant has a well-
defined, clear and certain legal right to the thing demanded and that it is the imperative duty of
defendant to perform the act required. The corresponding duty of the respondent to perform the
required act must be clear and specific [Lemi v. Valencia, G.R. No. L-20768, November 29,1968,126 SCRA
203; Ocampo v. Subido, G.R. No. L-28344, August 27, 1976, 72 SCRA 443.] The request of the petitioners
fails to meet this standard, there being no duty on the part of respondent to prepare the list requested.

WHEREFORE, the instant petition is hereby granted and respondent General Manager of the
Government Service Insurance System is ORDERED to allow petitioners access to documents and
records evidencing loans granted to Members of the former Batasang Pambansa, as petitioners may
specify, subject to reasonable regulations as to the time and manner of inspection, not incompatible
with this decision, as the GSIS may deem necessary.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Griño-Aquino, Medialdea and Regalado, JJ., concur.
G.R. No. L-9959 December 13, 1916

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, represented by the Treasurer of the Philippine
Islands,plaintiff-appellee,
vs.
EL MONTE DE PIEDAD Y CAJA DE AHORRAS DE MANILA, defendant-appellant.

William A. Kincaid and Thomas L. Hartigan for appellant.

Attorney-General Avanceña for appellee.

TRENT, J.:

About $400,000, were subscribed and paid into the treasury of the Philippine Islands by the inhabitants
of the Spanish Dominions of the relief of those damaged by the earthquake which took place in the
Philippine Islands on June 3, 1863. Subsequent thereto and on October 6 of that year, a central relief
board was appointed, by authority of the King of Spain, to distribute the moneys thus voluntarily
contributed. After a thorough investigation and consideration, the relief board allotted $365,703.50 to
the various sufferers named in its resolution, dated September 22, 1866, and, by order of the Governor-
General of the Philippine Islands, a list of these allotments, together with the names of those entitled
thereto, was published in the Official Gazette of Manila dated April 7, 1870. There was later distributed,
inaccordance with the above-mentioned allotments, the sum of $30,299.65, leaving a balance of
S365,403.85 for distribution. Upon the petition of the governing body of the Monte de Piedad, dated
February 1, 1833, the Philippine Government, by order dated the 1st of that month, directed its
treasurer to turn over to the Monte de Piedad the sum of $80,000 of the relief fund in installments of
$20,000 each. These amounts were received on the following dates: February 15, March 12, April 14,
and June 2, 1883, and are still in the possession of the Monte de Piedad. On account of various petitions
of the persons, and heirs of others to whom the above-mentioned allotments were made by the central
relief board for the payment of those amounts, the Philippine Islands to bring suit against the Monte de
Piedad a recover, "through the Attorney-General and in representation of the Government of the
Philippine Islands," the $80.000, together with interest, for the benefit of those persons or their heirs
appearing in the list of names published in the Official Gazette instituted on May 3, 1912, by the
Government of the Philippine Islands, represented by the Insular Treasurer, and after due trial,
judgment was entered in favor of the plaintiff for the sum of $80,000 gold or its equivalent in Philippine
currency, together with legal interest from February 28, 1912, and the costs of the cause. The defendant
appealed and makes the following assignment of errors:

1. The court erred in not finding that the eighty thousand dollars ($80,000), give to the Monte de
Piedad y Caja de Ahorros, were so given as a donation subject to one condition, to wit: the
return of such sum of money to the Spanish Government of these Islands, within eight days
following the day when claimed, in case the Supreme Government of Spain should not approve
the action taken by the former government.

2. The court erred in not having decreed that this donation had been cleared; said eighty
thousand dollars ($80,000) being at present the exclusive property of the appellant the Monte
de Piedad y Caja de Ahorros.

3. That the court erred in stating that the Government of the Philippine Islands has subrogated
the Spanish Government in its rights, as regards an important sum of money resulting from a
national subscription opened by reason of the earthquake of June 3, 1863, in these Island.

4. That the court erred in not declaring that Act Numbered 2109, passed by the Philippine
Legislature on January 30, 1912, is unconstitutional.
 5. That the court erred in holding in its decision that there is no title for the prescription of this
suit brought by the Insular Government against the Monte de Piedad y Caja de Ahorros for the
reimbursement of the eighty thousand dollars ($80,000) given to it by the late Spanish
Government of these Islands.

6. That the court erred in sentencing the Monte de Piedad y Caja de Ahorros to reimburse the
Philippine Government in the sum of eighty thousand dollars ($80,000) gold coin, or the
equivalent thereof in the present legal tender currency in circulation, with legal interest thereon
from February 28th, 1912, and the costs of this suit.

In the royal order of June 29, 1879, the Governor-General of the Philippine Islands was directed to
inform the home Government in what manner the indemnity might be paid to which, by virtue of the
resolutions of the relief board, the persons who suffered damage by the earthquake might be entitled,
in order to perform the sacred obligation which the Government of Spain had assumed toward the
donors.

The next pertinent document in order is the defendant's petition, dated February 1, 1883, addressed to
the Governor-General of the Philippine Islands, which reads:

Board of Directors of the Monte de Piedad of Manila Presidencia.

Excellency: The Board of Directors of the Monte de Piedad y Caja de Ahorros of Manila informs
your Excellency, First: That the funds which it has up to the present been able to dispose of have
been exhausted in loans on jewelry, and there only remains the sum of one thousand and odd
pesos, which will be expended between to-day and day after tomorrow. Second: That, to
maintain the credit of the establishment, which would be greatly injured were its operations
suspended, it is necessary to procure money. Third: That your Excellency has proposed to His
Majesty's Government to apply to the funds of theMonte de Piedad a part of the funds held in
the treasury derived form the national subscription for the relief of the distress caused by the
earthquake of 1863. Fourth: That in the public treasury there is held at the disposal of the
central earthquake relief board over $1090,000 which was deposited in the said treasury by
order of your general Government, it having been transferred thereto from the Spanish-Filipino
Bank where it had been held. fifth: That in the straightened circumstances of the moment, your
Excellency can, to avert impending disaster to the Monte de Piedad, order that, out of that sum
of one hundred thousand pesos held in the Treasury at the disposal of the central relief board,
there be transferred to the Monte de Piedadthe sum of $80,000, there to be held under the
same conditions as at present in the Treasury, to wit, at the disposal of the Relief Board. Sixth:
That should this transfer not be approved for any reason, either because of the failure of His
Majesty's Government to approve the proposal made by your Excellency relative to the
application to the needs of the Monte de Piedad of a pat of the subscription intended to believe
the distress caused by the earthquake of 1863, or for any other reason, the board of directors of
the Monte de Piedad obligates itself to return any sums which it may have received on account
of the eighty thousand pesos, or the whole thereof, should it have received the same, by
securing a loan from whichever bank or banks may lend it the money at the cheapest rate upon
the security of pawned jewelry. — This is an urgent measure to save the Monte de Piedad in the
present crisis and the board of directors trusts to secure your Excellency's entire cooperation
and that of the other officials who have take part in the transaction.

The Governor-General's resolution on the foregoing petition is as follows:

GENERAL GOVERNMENT OF THE PHILIPPINES.

MANILA, February 1, 1883.
In view of the foregoing petition addressed to me by the board of directors of the Monte de
Piedad of this city, in which it is stated that the funds which the said institution counted upon
are nearly all invested in loans on jewelry and that the small account remaining will scarcely
suffice to cover the transactions of the next two days, for which reason it entreats the general
Government that, in pursuance of its telegraphic advice to H. M. Government, the latter direct
that there be turned over to said Monte de Piedad $80,000 out of the funds in the public
treasury obtained from the national subscription for the relief of the distress caused by the
earthquake of 1863, said board obligating itself to return this sum should H. M. Government, for
any reason, not approve the said proposal, and for this purpose it will procure funds by means
of loans raised on pawned jewelry; it stated further that if the aid so solicited is not furnished, it
will be compelled to suspend operations, which would seriously injure the credit of so
beneficient an institution; and in view of the report upon the matter made by the Intendencia
General de Hacienda; and considering the fact that the public treasury has on hand a much
greater sum from the source mentioned than that solicited; and considering that this general
Government has submitted for the determination of H. M. Government that the balance which,
after strictly applying the proceeds obtained from the subscription referred to, may remain as a
surplus should be delivered to the Monte de Piedad, either as a donation, or as a loan upon the
security of the credit of the institution, believing that in so doing the wishes of the donors would
be faithfully interpreted inasmuch as those wishes were no other than to relieve distress, an act
of charity which is exercised in the highest degree by the Monte de Piedad, for it liberates needy
person from the pernicious effects of usury; and

Considering that the lofty purposes that brought about the creation of the pious institution
referred to would be frustrated, and that the great and laudable work of its establishment, and
that the great and laudable and valuable if the aid it urgently seeks is not granted, since the
suspension of its operations would seriously and regrettably damage the ever-growing credit of
the Monte de Piedad; and

Considering that if such a thing would at any time cause deep distress in the public mind, it
might be said that at the present juncture it would assume the nature of a disturbance of public
order because of the extreme poverty of the poorer classes resulting from the late calamities,
and because it is the only institution which can mitigate the effects of such poverty; and

Considering that no reasonable objection can be made to granting the request herein contained,
for the funds in question are sufficiently secured in the unlikely event that H> M. Government
does not approve the recommendation mentioned, this general Government, in the exercise of
the extraordinary powers conferred upon it and in conformity with the report of the Intendencia
de Hacienda, resolves as follows:

First. Authority is hereby given to deliver to the Monte de Piedad, out of the sum held in the
public treasury of these Islands obtained from the national subscription opened by reason of the
earthquakes of 1863, amounts up to the sum $80,000, as its needs may require, in installments
of $20,000.

Second. The board of directors of the Monte de Piedad is solemnly bound to return, within eight
days after demand, the sums it may have so received, if H. M. Government does not approve
this resolution.

Third. The Intendencia General de Hacienda shall forthwith, and in preference to all other work,
proceed to prepare the necessary papers so that with the least possible delay the payment
referred to may be made and the danger that menaces the Monte de Piedad of having to
suspend its operations may be averted.
 H. M. Government shall be advised hereof.lawphi1.net
(Signed) P. DE RIVERA.

By the royal order of December 3, 1892, the Governor-General of the Philippine Islands was ordered to
"inform this ministerio what is the total sum available at the present time, taking into consideration the
sums delivered to the Monte de Piedad pursuant to the decree issued by your general Government on
February 1, 1883," and after the rights of the claimants, whose names were published in the Official
Gazette of Manila on April 7, 1870, and their heirs had been established, as therein provided, as such
persons "have an unquestionable right to be paid the donations assigned to them therein, your general
Government shall convoke them all within a reasonable period and shall pay their shares to such as shall
identify themselves, without regard to their financial status," and finally "that when all the proceedings
and operations herein mentioned have been concluded and the Government can consider itself free
from all kinds of claims on the part of those interested in the distribution of the funds deposited in the
vaults of the Treasury, such action may be taken as the circumstances shall require, after first consulting
the relief board and your general Government and taking account of what sums have been delivered to
the Monte de Piedad and those that were expended in 1888 to relieve public calamities," and "in order
that all the points in connection with the proceedings had as a result of the earthquake be clearly
understood, it is indispensable that the offices hereinbefore mentioned comply with the provisions
contained in paragraphs 2 and 3 of the royal order of June 25, 1879." On receipt of this Finance order by
the Governor-General, the Department of Finance was called upon for a report in reference to the
$80,000 turned over to the defendant, and that Department's report to the Governor-General dated
June 28, 1893, reads:

Intendencia General de Hacienda de Filipinas (General Treasury of the Philippines) — Excellency.

— By Royal Order No. 1044 of December 3, last, it is provided that the persons who sustained
losses by the earthquakes that occurred in your capital in the year 1863 shall be paid the
amounts allotted to them out of the sums sent from Spain for this purpose, with observance of
the rules specified in the said royal order, one of them being that before making the payment to
the interested parties the assets shall be reduced to money. These assets, during the long period
of time that has elapsed since they were turned over to the Treasury of the Philippine Islands,
were used to cover the general needs of the appropriation, a part besides being invested in the
relief of charitable institutions and another part to meet pressing needs occasioned by public
calamities. On January 30, last, your Excellency was please to order the fulfillment of that
sovereign mandate and referred the same to this Intendencia for its information and the
purposes desired (that is, for compliance with its directions and, as aforesaid, one of these being
the liquidation, recovery, and deposit with the Treasury of the sums paid out of that fund and
which were expended in a different way from that intended by the donors) and this Intendencia
believed the moment had arrived to claim from the board of directors of the Monte de Piedad y
Caja de Ahorros the sum of 80,000 pesos which, by decree of your general Government of the
date of February 1, 1883, was loaned to it out of the said funds, the (Monte de Piedad)
obligating itself to return the same within the period of eight days if H. M. Government did not
approve the delivery. On this Intendencia's demanding from the Monte de Piedad the eighty
thousand pesos, thus complying with the provisions of the Royal Order, it was to be supposed
that no objection to its return would be made by the Monte de Piedad for, when it received the
loan, it formally engaged itself to return it; and, besides, it was indisputable that the moment to
do so had arrived, inasmuch as H. M. Government, in ordering that the assets of the earthquake
relief fund should he collected, makes express mention of the 80,000 pesos loaned to the Monte
de Piedad, without doubt considering as sufficient the period of ten years during which it has
been using this large sum which lawfully belongs to their persons. This Intendencia also
supposed that the Monte de Piedad no longer needed the amount of that loan, inasmuch as, far
from investing it in beneficient transactions, it had turned the whole amount into the voluntary
deposit funds bearing 5 per cent interests, the result of this operation being that the debtor
loaned to the creditor on interest what the former had gratuitously received. But the Monte de
Piedad, instead of fulfilling the promise it made on receiving the sum, after repeated demands
refused to return the money on the ground that only your Excellency, and not
 the Intendencia (Treasury), is entitled to order the reimbursement, taking no account of the fact
that this Intendencia was acting in the discharge of a sovereign command, the fulfillment of
which your Excellency was pleased to order; and on the further ground that the sum of 80,000
pesos which it received from the fund intended for the earthquake victims was not received as a
loan, but as a donation, this in the opinion of this Intendencia, erroneously interpreting both the
last royal order which directed the apportionment of the amount of the subscription raised in
the year 1863 and the superior decree which granted the loan, inasmuch as in this letter no
donation is made to the Monte de Piedad of the 80,000 pesos, but simply a loan; besides, no
donation whatever could be made of funds derived from a private subscription raised for a
specific purpose, which funds are already distributed and the names of the beneficiaries have
been published in the Gaceta, there being lacking only the mere material act of the delivery,
which has been unduly delayed. In view of the unexpected reply made by the Monte de Piedad,
and believing it useless to insist further in the matter of the claim for the aforementioned loan,
or to argue in support thereof, this Intendencia believes the intervention of your Excellency
necessary in this matter, if the royal Order No. 1044 of December 3, last, is to be complied with,
and for this purpose I beg your Excellency kindly to order the Monte de Piedad to reimburse
within the period of eight days the 80,000 which it owes, and that you give this Intendencia
power to carry out the provisions of the said royal order. I must call to the attention of your
Excellency that the said pious establishment, during the last few days and after demand was
made upon it, has endorsed to the Spanish-Filipino Bank nearly the whole of the sum which it
had on deposit in the general deposit funds.

The record in the case under consideration fails to disclose any further definite action taken by either
the Philippine Government or the Spanish Government in regard to the $80,000 turned over to
the Monte de Piedad.

In the defendant's general ledger the following entries appear: "Public Treasury: February 15, 1883,
$20,000; March 12, 1883, $20,000; April 14, 1883, $20,000; June 2, 1883, $20,000, total $80,000." The
book entry for this total is as follows: "To the public Treasury derived from the subscription for the
earthquake of 1863, $80,000 received from general Treasury as a returnable loan, and without interest."
The account was carried in this manner until January 1, 1899, when it was closed by transferring the
amount to an account called "Sagrada Mitra," which latter account was a loan of $15,000 made to the
defendant by the Archbishop of Manila, without interest, thereby placing the "Sagrada Mitra" account
at $95,000 instead of $15,000. The above-mentioned journal entry for January 1, 1899, reads: "Sagrada
Mitra and subscription, balance of these two account which on this date are united in accordance with
an order of the Exmo. Sr. Presidente of the Council transmitted verbally to the Presidente Gerente of
these institutions, $95,000."

On March 16, 1902, the Philippine government called upon the defendant for information concerning
the status of the $80,000 and received the following reply:

MANILA, March 31, 1902.

To the Attorney-General of the Department of Justice of the Philippine Islands.

SIR: In reply to your courteous letter of the 16th inst., in which you request information from
this office as to when and for what purpose the Spanish Government delivered to the Monte de
Piedad eighty thousand pesos obtained from the subscription opened in connection with the
earthquake of 1863, as well as any other information that might be useful for the report which
your office is called upon to furnish, I must state to your department that the books kept in
these Pious Institutions, and which have been consulted for the purpose, show that on the 15th
of February, 1883, they received as a reimbursable loan and without interest, twenty thousand
pesos, which they deposited with their own funds. On the same account and on each of the
dates of March 12, April 14 and June 2 of the said year, 1883, they also received and turned into
 their funds a like sum of twenty thousand pesos, making a total of eighty thousand pesos. —
(Signed) Emilio Moreta.

I hereby certify that the foregoing is a literal copy of that found in the letter book No. 2 of those
Pious Institutions.

Manila, November 19, 1913

(Sgd.) EMILIO LAZCANOTEGUI,
Secretary

(Sgd.) O. K. EMILIO MORETA,

Managing Director.

The foregoing documentary evidence shows the nature of the transactions which took place between
the Government of Spain and the Philippine Government on the one side and the Monte de Piedad on
the other, concerning the $80,000. The Monte de Piedad, after setting forth in its petition to the
Governor-General its financial condition and its absolute necessity for more working capital, asked that
out of the sum of $100,000 held in the Treasury of the Philippine Islands, at the disposal of the central
relief board, there be transferred to it the sum of $80,000 to be held under the same conditions, to wit,
"at the disposal of the relief board." The Monte de Piedad agreed that if the transfer of these funds
should not be approved by the Government of Spain, the same would be returned forthwith. It did not
ask that the $80,000 be given to it as a donation. The Governor-General, after reciting the substance of
the petition, stated that "this general Government has submitted for the determination of H. M.
Government that the balance which, after strictly applying the proceeds obtained from the subscription
referred to, may remain as a surplus, should be delivered to the Monte de Piedad, either as a donation,
or as a loan upon the security of the credit of the institution," and "considering that no reasonable
objection can be made to granting the request herein contained," directed the transfer of the $80,000
to be made with the understanding that "the Board of Directors of the Monte de Piedad is solemnly
bound to return, within eight days after demand, the sums it may have so received, if H. M. Government
does not approve this resolution." It will be noted that the first and only time the word "donation" was
used in connection with the $80,000 appears in this resolution of the Governor-General. It may be
inferred from the royal orders that the Madrid Government did tacitly approve of the transfer of the
$80,000 to the Monte de Piedad as a loan without interest, but that Government certainly did not
approve such transfer as a donation for the reason that the Governor-General was directed by the royal
order of December 3, 1892, to inform the Madrid Government of the total available sum of the
earthquake fund, "taking into consideration the sums delivered to the Monte de Piedadpursuant to the
decree issued by your general Government on February 1, 1883." This language, nothing else appearing,
might admit of the interpretation that the Madrid Government did not intend that the Governor-
General of the Philippine Islands should include the $80,000 in the total available sum, but when
considered in connection with the report of the Department of Finance there can be no doubt that it
was so intended. That report refers expressly to the royal order of December 3d, and sets forth in detail
the action taken in order to secure the return of the $80,000. The Department of Finance, acting under
the orders of the Governor-General, understood that the $80,000 was transferred to the Monte de
Piedad well knew that it received this sum as a loan interest." The amount was thus carried in its books
until January, 1899, when it was transferred to the account of the "Sagrada Mitra" and was thereafter
known as the "Sagrada Mitra and subscription account." Furthermore, the Monte de Piedad recognized
and considered as late as March 31, 1902, that it received the $80,000 "as a returnable loan, and
without interest." Therefore, there cannot be the slightest doubt the fact that the Monte de
Piedad received the $80,000 as a mere loan or deposit and not as a donation. Consequently, the first
alleged error is entirely without foundation.

Counsel for the defendant, in support of their third assignment of error, say in their principal brief that:

The Spanish nation was professedly Roman Catholic and its King enjoyed the distinction of being
deputy ex officio of the Holy See and Apostolic Vicar-General of the Indies, and as such it was his
 duty to protect all pious works and charitable institutions in his kingdoms, especially those of
the Indies; among the latter was the Monte de Piedad of the Philippines, of which said King and
his deputy the Governor-General of the Philippines, as royal vice-patron, were, in a special and
peculiar manner, the protectors; the latter, as a result of the cession of the Philippine Islands,
Implicitly renounced this high office and tacitly returned it to the Holy See, now represented by
the Archbishop of Manila; the national subscription in question was a kind of foundation or
pious work, for a charitable purpose in these Islands; and the entire subscription not being
needed for its original purpose, the royal vice-patron, with the consent of the King, gave the
surplus thereof to an analogous purpose; the fulfillment of all these things involved, in the
majority, if not in all cases, faithful compliance with the duty imposed upon him by the Holy See,
when it conferred upon him the royal patronage of the Indies, a thing that touched him very
closely in his conscience and religion; the cessionary Government though Christian, was not
Roman Catholic and prided itself on its policy of non-interference in religious matters, and
inveterately maintained a complete separation between the ecclesiastical and civil powers.

In view of these circumstances it must be quite clear that, even without the express provisions
of the Treaty of Paris, which apparently expressly exclude such an idea, it did not befit the honor
of either of the contracting parties to subrogate to the American Government in lieu of the
Spanish Government anything respecting the disposition of the funds delivered by the latter to
the Monte de Piedad. The same reasons that induced the Spanish Government to take over such
things would result in great inconvenience to the American Government in attempting to do so.
The question was such a delicate one, for the reason that it affected the conscience, deeply
religious, of the King of Spain, that it cannot be believed that it was ever his intention to confide
the exercise thereof to a Government like the American. (U. S. vs. Arredondo, 6 Pet. [U. S.], 711.)

It is thus seen that the American Government did not subrogate the Spanish Government or
rather, the King of Spain, in this regard; and as the condition annexed to the donation was lawful
and possible of fulfillment at the time the contract was made, but became impossible of
fulfillment by the cession made by the Spanish Government in these Islands, compliance
therewith is excused and the contract has been cleared thereof.

The contention of counsel, as thus stated, in untenable for two reason, (1) because such contention is
based upon the erroneous theory that the sum in question was a donation to the Monte de Piedad and
not a loan, and (2) because the charity founded by the donations for the earthquake sufferers is not and
never was intended to be an ecclesiastical pious work. The first proposition has already been decided
adversely to the defendant's contention. As to the second, the record shows clearly that the fund was
given by the donors for a specific and definite purpose — the relief of the earthquake sufferers — and
for no other purpose. The money was turned over to the Spanish Government to be devoted to that
purpose. The Spanish Government remitted the money to the Philippine Government to be distributed
among the suffers. All officials, including the King of Spain and the Governor-General of the Philippine
Islands, who took part in the disposal of the fund, acted in their purely civil, official capacity, and the fact
that they might have belonged to a certain church had nothing to do with their acts in this matter. The
church, as such, had nothing to do with the fund in any way whatever until the $80,000 reached the
coffers of the Monte de Piedad (an institution under the control of the church) as a loan or deposit. If
the charity in question had been founded as an ecclesiastical pious work, the King of Spain and the
Governor-General, in their capacities as vicar-general of the Indies and as royal vice-patron, respectively,
would have disposed of the fund as such and not in their civil capacities, and such functions could not
have been transferred to the present Philippine Government, because the right to so act would have
arisen out of the special agreement between the Government of Spain and the Holy See, based on the
union of the church and state which was completely separated with the change of sovereignty.

And in their supplemental brief counsel say:

By the conceded facts the money in question is part of a charitable subscription. The donors
were persons in Spain, the trustee was the Spanish Government, the donees, the cestuis que
 trustent, were certain persons in the Philippine Islands. The whole matter is one of trusteeship.
This is undisputed and indisputable. It follows that the Spanish Government at no time was the
owner of the fund. Not being the owner of the fund it could not transfer the ownership.
Whether or not it could transfer its trusteeship it certainly never has expressly done so and the
general terms of property transfer in the Treaty of Paris are wholly insufficient for such a
purpose even could Spain have transferred its trusteeship without the consent of the donors
and even could the United States, as a Government, have accepted such a trust under any
power granted to it by the thirteen original States in the Constitution, which is more than
doubtful. It follows further that this Government is not a proper party to the action. The only
persons who could claim to be damaged by this payment to the Monte, if it was unlawful, are
the donors or the cestuis que trustent, and this Government is neither.

If "the whole matter is one of trusteeship," and it being true that the Spanish Government could not, as
counsel say, transfer the ownership of the fund to the Monte de Piedad, the question arises, who may
sue to recover this loan? It needs no argument to show that the Spanish or Philippine Government, as
trustee, could maintain an action for this purpose had there been no change of sovereignty and if the
right of action has not prescribed. But those governments were something more than mere common
law trustees of the fund. In order to determine their exact status with reference to this fund, it is
necessary to examine the law in force at the time there transactions took place, which are the law of
June 20, 1894, the royal decree of April 27. 1875, and the instructions promulgated on the latter date.
These legal provisions were applicable to the Philippine Islands (Benedicto vs. De la Rama, 3 Phil. Rep.,
34)

The funds collected as a result of the national subscription opened in Spain by royal order of the Spanish
Government and which were remitted to the Philippine Government to be distributed among the
earthquake sufferers by the Central Relief Board constituted, under article 1 of the law of June 20, 1894,
and article 2 of the instructions of April 27, 1875, a special charity of a temporary nature as
distinguished from a permanent public charitable institution. As the Spanish Government initiated the
creation of the fund and as the donors turned their contributions over to that Government, it became
the duty of the latter, under article 7 of the instructions, to exercise supervision and control over the
moneys thus collected to the end that the will of the donors should be carried out. The relief board had
no power whatever to dispose of the funds confided to its charge for other purposes than to distribute
them among the sufferers, because paragraph 3 of article 11 of the instructions conferred the power
upon the secretary of the interior of Spain, and no other, to dispose of the surplus funds, should there
be any, by assigning them to some other charitable purpose or institution. The secretary could not
dispose of any of the funds in this manner so long as they were necessary for the specific purpose for
which they were contributed. The secretary had the power, under the law above mentioned to appoint
and totally or partially change the personnel of the relief board and to authorize the board to defend the
rights of the charity in the courts. The authority of the board consisted only in carrying out the will of the
donors as directed by the Government whose duty it was to watch over the acts of the board and to see
that the funds were applied to the purposes for which they were contributed .The secretary of the
interior, as the representative of His Majesty's Government, exercised these powers and duties through
the Governor-General of the Philippine Islands. The Governments of Spain and of the Philippine Islands
in complying with their duties conferred upon them by law, acted in their governmental capacities in
attempting to carry out the intention of the contributors. It will this be seen that those governments
were something more, as we have said, than mere trustees of the fund.

It is further contended that the obligation on the part of the Monte de Piedad to return the $80,000 to
the Government, even considering it a loan, was wiped out on the change of sovereignty, or inn other
words, the present Philippine Government cannot maintain this action for that reason. This contention,
if true, "must result from settled principles of rigid law," as it cannot rest upon any title to the fund in
the Monte de Piedad acquired prior to such change. While the obligation to return the $80,000 to the
Spanish Government was still pending, war between the United States and Spain ensued. Under the
Treaty of Paris of December 10, 1898, the Archipelago, known as the Philippine Islands, was ceded to
the United States, the latter agreeing to pay Spain the sum of $20,000,000. Under the first paragraph of
the eighth article, Spain relinquished to the United States "all buildings, wharves, barracks, forts,
structures, public highways, and other immovable property which, in conformity with law, belonged to
the public domain, and as such belonged to the crown of Spain." As the $80,000 were not included
therein, it is said that the right to recover this amount did not, therefore, pass to the present sovereign.
This, in our opinion, does not follow as a necessary consequence, as the right to recover does not rest
upon the proposition that the $80,000 must be "other immovable property" mentioned in article 8 of
the treaty, but upon contractual obligations incurred before the Philippine Islands were ceded to the
United States. We will not inquire what effect his cession had upon the law of June 20, 1849, the royal
decree of April 27, 1875, and the instructions promulgated on the latter date. In Vilas vs. Manila (220 U.
S., 345), the court said:

That there is a total abrogation of the former political relations of the inhabitants of the ceded
region is obvious. That all laws theretofore in force which are in conflict with the political
character, constitution, or institutions of the substituted sovereign, lose their force, is also plain.
(Alvarez y Sanchez vs. United States, 216 U. S., 167.) But it is equally settled in the same public
law that the great body of municipal law which regulates private and domestic rights continues
in force until abrogated or changed by the new ruler.

If the above-mentioned legal provisions are in conflict with the political character, constitution or
institutions of the new sovereign, they became inoperative or lost their force upon the cession of the
Philippine Islands to the United States, but if they are among "that great body of municipal law which
regulates private and domestic rights," they continued in force and are still in force unless they have
been repealed by the present Government. That they fall within the latter class is clear from their very
nature and character. They are laws which are not political in any sense of the word. They conferred
upon the Spanish Government the right and duty to supervise, regulate, and to some extent control
charities and charitable institutions. The present sovereign, in exempting "provident institutions, savings
banks, etc.," all of which are in the nature of charitable institutions, from taxation, placed such
institutions, in so far as the investment in securities are concerned, under the general supervision of the
Insular Treasurer (paragraph 4 of section 111 of Act No. 1189; see also Act No. 701).

Furthermore, upon the cession of the Philippine Islands the prerogatives of he crown of Spain devolved
upon he United States. In Magill vs. Brown (16 Fed. Cas., 408), quoted with approval in Mormon
Charch vs. United States (136 U. S.,1, 57), the court said:

The Revolution devolved on the State all the transcendent power of Parliament, and the
prerogative of the crown, and gave their Acts the same force and effect.

In Fontain vs. Ravenel (17 Hw., 369, 384), Mr. Justice McLean, delivering the opinion of the court in a
charity case, said:

When this country achieved its independence, the prerogatives of the crown devolved upon the
people of the States. And this power still remains with them except so fact as they have
delegated a portion of it to the Federal Government. The sovereign will is made known to us by
legislative enactment. The State as a sovereign, is the parens patriae.

Chancelor Kent says:

In this country, the legislature or government of the State, as parens patriae, has the right to
enforce all charities of public nature, by virtue of its general superintending authority over the
public interests, where no other person is entrusted with it. (4 Kent Com., 508, note.)

The Supreme Court of the United States in Mormon Church vs. United States, supra, after approving also
the last quotations, said:
 This prerogative of parens patriae is inherent in the supreme power of every State, whether that
power is lodged in a royal person or in the legislature, and has no affinity to those arbitrary
powers which are sometimes exerted by irresponsible monarchs to the great detriment of the
people and the destruction of their liberties. On the contrary, it is a most beneficient functions,
and often necessary to be exercised in the interest of humanity, and for the prevention of injury
to those who cannot protect themselves.

The court in the same case, after quoting from Sohier vs. Mass. General Hospital (3 Cush., 483, 497),
wherein the latter court held that it is deemed indispensible that there should be a power in the
legislature to authorize the same of the estates of in facts, idiots, insane persons, and persons not
known, or not in being, who cannot act for themselves, said:

These remarks in reference to in facts, insane persons and person not known, or not in being,
apply to the beneficiaries of charities, who are often in capable of vindicating their rights, and
justly look for protection to the sovereign authority, acting as parens patriae. They show that
this beneficient functions has not ceased t exist under the change of government from a
monarchy to a republic; but that it now resides in the legislative department, ready to be called
into exercise whenever required for the purposes of justice and right, and is a clearly capable of
being exercised in cases of charities as in any other cases whatever.

In People vs. Cogswell (113 Cal. 129, 130), it was urged that the plaintiff was not the real party in
interest; that the Attorney-General had no power to institute the action; and that there must be an
allegation and proof of a distinct right of the people as a whole, as distinguished from the rights of
individuals, before an action could be brought by the Attorney-General in the name of the people. The
court, in overruling these contentions, held that it was not only the right but the duty of the Attorney-
General to prosecute the action, which related to charities, and approved the following quotation from
Attorney-General vs. Compton (1 Younge & C. C., 417):

Where property affected by a trust for public purposes is in the hands of those who hold it
devoted to that trust, it is the privilege of the public that the crown should be entitled to
intervene by its officers for the purpose of asserting, on behalf on the public generally, the
public interest and the public right, which, probably, no individual could be found effectually to
assert, even if the interest were such as to allow it. (2 Knet's Commentaries, 10th ed., 359;
Lewin on Trusts, sec. 732.)

It is further urged, as above indicated, that "the only persons who could claim to be damaged by this
payment to the Monte, if it was unlawful, are the donors or the cestuis que trustent, and this
Government is neither. Consequently, the plaintiff is not the proper party to bring the action." The
earthquake fund was the result or the accumulation of a great number of small contributions. The
names of the contributors do not appear in the record. Their whereabouts are unknown. They parted
with the title to their respective contributions. The beneficiaries, consisting of the original sufferers and
their heirs, could have been ascertained. They are quite numerous also. And no doubt a large number of
the original sufferers have died, leaving various heirs. It would be impracticable for them to institute an
action or actions either individually or collectively to recover the $80,000. The only course that can be
satisfactorily pursued is for the Government to again assume control of the fund and devote it to the
object for which it was originally destined.

The impracticability of pursuing a different course, however, is not the true ground upon which the right
of the Government to maintain the action rests. The true ground is that the money being given to a
charity became, in a measure, public property, only applicable, it is true, to the specific purposes to
which it was intended to be devoted, but within those limits consecrated to the public use, and became
part of the public resources for promoting the happiness and welfare of the Philippine Government.
(Mormon Church vs. U. S., supra.) To deny the Government's right to maintain this action would be
contrary to sound public policy, as tending to discourage the prompt exercise of similar acts of humanity
and Christian benevolence in like instances in the future.
As to the question raised in the fourth assignment of error relating to the constitutionality of Act No.
2109, little need be said for the reason that we have just held that the present Philippine Government is
the proper party to the action. The Act is only a manifestation on the part of the Philippine Government
to exercise the power or right which it undoubtedly had. The Act is not, as contended by counsel, in
conflict with the fifth section of the Act of Congress of July 1, 1902, because it does not take property
without due process of law. In fact, the defendant is not the owner of the $80,000, but holds it as a loan
subject to the disposal of the central relief board. Therefor, there can be nothing in the Act which
transcends the power of the Philippine Legislature.

In Vilas vs. Manila, supra, the plaintiff was a creditor of the city of Manila as it existed before the cession
of the Philippine Islands to the United States by the Treaty of Paris of December 10, 1898. The action
was brought upon the theory that the city, under its present charter from the Government of the
Philippine Islands, was the same juristic person, and liable upon the obligations of the old city. This court
held that the present municipality is a totally different corporate entity and in no way liable for the
debts of the Spanish municipality. The Supreme Court of the United States, in reversing this judgment
and in holding the city liable for the old debt, said:

The juristic identity of the corporation has been in no wise affected, and, in law, the present city
is, in every legal sense, the successor of the old. As such it is entitled to the property and
property rights of the predecessor corporation, and is, in law, subject to all of its liabilities.

In support of the fifth assignment of error counsel for the defendant argue that as the Monte de
Piedad declined to return the $80,000 when ordered to do so by the Department of Finance in June,
1893, the plaintiff's right of action had prescribed at the time this suit was instituted on May 3, 1912,
citing and relying upon article 1961, 1964 and 1969 of the Civil Code. While on the other hand, the
Attorney-General contends that the right of action had not prescribed (a) because the defense of
prescription cannot be set up against the Philippine Government, (b) because the right of action to
recover a deposit or trust funds does not prescribe, and (c) even if the defense of prescription could be
interposed against the Government and if the action had, in fact, prescribed, the same was revived by
Act No. 2109.

The material facts relating to this question are these: The Monte de Piedad received the $80,000 in 1883
"to be held under the same conditions as at present in the treasury, to wit, at the disposal of the relief
board." In compliance with the provisions of the royal order of December 3, 1892, the Department of
Finance called upon the Monte de Piedad in June, 1893, to return the $80,000. The Monte declined to
comply with this order upon the ground that only the Governor-General of the Philippine Islands and
not the Department of Finance had the right to order the reimbursement. The amount was carried on
the books of the Monte as a returnable loan until January 1, 1899, when it was transferred to the
account of the "Sagrada Mitra." On March 31, 1902, the Monte, through its legal representative, stated
in writing that the amount in question was received as a reimbursable loan, without interest. Act No.
2109 became effective January 30, 1912, and the action was instituted on May 3rd of that year.

Counsel for the defendant treat the question of prescription as if the action was one between
individuals or corporations wherein the plaintiff is seeking to recover an ordinary loan. Upon this theory
June, 1893, cannot be taken as the date when the statute of limitations began to run, for the reason that
the defendant acknowledged in writing on March 31, 1902, that the $80,000 were received as a loan,
thereby in effect admitting that it still owed the amount. (Section 50, Code of Civil Procedure.) But if
counsels' theory is the correct one the action may have prescribed on May 3, 1912, because more than
ten full years had elapsed after March 31, 1902. (Sections 38 and 43, Code of Civil Procedure.)

Is the Philippine Government bound by the statute of limitations? The Supreme Court of the United
States in U. S.vs. Nashville, Chattanooga & St. Louis Railway Co. (118 U. S., 120, 125), said:
 It is settled beyond doubt or controversy — upon the foundation of the great principle of public
policy, applicable to all governments alike, which forbids that the public interests should be
prejudiced by the negligence of the officers or agents to whose care they are confided — that
the United States, asserting rights vested in it as a sovereign government, is not bound by any
statute of limitations, unless Congress has clearly manifested its intention that it should be so
bound. (Lindsey vs. Miller, 6 Pet. 666; U. S. vs.Knight, 14 Pet., 301; Gibson vs. Chouteau, 13
Wall., 92; U. S. vs. Thompson, 98 U. S., 486; Fink vs. O'Neil, 106 U. S., 272, 281.)

In Gibson vs. Choteau, supra, the court said:

It is a matter of common knowledge that statutes of limitation do not run against the State. That
no laches can be imputed to the King, and that no time can bar his rights, was the maxim of the
common laws, and was founded on the principle of public policy, that as he was occupied with
the cares of government he ought not to suffer from the negligence of his officer and servants.
The principle is applicable to all governments, which must necessarily act through numerous
agents, and is essential to a preservation of the interests and property of the public. It is upon
this principle that in this country the statutes of a State prescribing periods within which rights
must be prosecuted are not held to embrace the State itself, unless it is expressly designated or
the mischiefs to be remedied are of such a nature that it must necessarily be included. As
legislation of a State can only apply to persons and thing over which the State has jurisdiction,
the United States are also necessarily excluded from the operation of such statutes.

In 25 Cyc., 1006, the rule, supported by numerous authorities, is stated as follows:

In the absence of express statutory provision to the contrary, statute of limitations do not as a
general rule run against the sovereign or government, whether state or federal. But the rule is
otherwise where the mischiefs to be remedied are of such a nature that the state must
necessarily be included, where the state goes into business in concert or in competition with her
citizens, or where a party seeks to enforces his private rights by suit in the name of the state or
government, so that the latter is only a nominal party.

In the instant case the Philippine Government is not a mere nominal party because it, in bringing and
prosecuting this action, is exercising its sovereign functions or powers and is seeking to carry out a trust
developed upon it when the Philippine Islands were ceded to the United States. The United States
having in 1852, purchased as trustee for the Chickasaw Indians under treaty with that tribe, certain
bonds of the State of Tennessee, the right of action of the Government on the coupons of such bonds
could not be barred by the statute of limitations of Tennessee, either while it held them in trust for the
Indians, or since it became the owner of such coupons. (U. S.vs. Nashville, etc., R. Co., supra.) So where
lands are held in trust by the state and the beneficiaries have no right to sue, a statute does not run
against the State's right of action for trespass on the trust lands. (Greene Tp. vs.Campbell, 16 Ohio St.,
11; see also Atty.-Gen. vs. Midland R. Co., 3 Ont., 511 [following Reg. vs. Williams, 39 U. C. Q. B., 397].)

These principles being based "upon the foundation of the great principle of public policy" are, in the
very nature of things, applicable to the Philippine Government.

Counsel in their argument in support of the sixth and last assignments of error do not question the
amount of the judgment nor do they question the correctness of the judgment in so far as it allows
interest, and directs its payment in gold coin or in the equivalent in Philippine currency.

For the foregoing reasons the judgment appealed from is affirmed, with costs against the appellant. So
ordered.
G.R. No. L-25843 July 25, 1974
MELCHORA CABANAS, plaintiff-appellee,
vs.
FRANCISCO PILAPIL, defendant-appellant.
Seno, Mendoza & Associates for plaintiff-appellee.
Emilio Benitez, Jr. for defendant-appellant.
FERNANDO, J.:p
The disputants in this appeal from a question of
law from a lower court decision are the mother
and the uncle of a minor beneficiary of the
proceeds of an insurance policy issued on the
life of her deceased father. The dispute centers
as to who of them should be entitled to act as
trustee thereof. The lower court applying the
appropriate Civil Code provisions decided in
favor of the mother, the plaintiff in this case.
Defendant uncle appealed. As noted, the lower
court acted the way it did following the specific
mandate of the law. In addition, it must have
taken into account the principle that in cases of
this nature the welfare of the child is the
paramount consideration. It is not an
unreasonable assumption that between a
mother and an uncle, the former is likely to
lavish more care on and pay greater attention
to her. This is all the more likely considering
that the child is with the mother. There are no
circumstances then that did militate against
what conforms to the natural order of things,
even if the language of the law were not as
clear. It is not to be lost sight of either that the
judiciary pursuant to its role as an agency of the
State as parens patriae, with an even greater
stress on family unity under the present
Constitution, did weigh in the balance the
opposing claims and did come to the conclusion
that the welfare of the child called for the
mother to be entrusted with such responsibility.
We have to affirm.
The appealed decision made clear: "There is no
controversy as to the facts. " 1 The insured,
Florentino Pilapil had a child, Millian Pilapil,
with a married woman, the plaintiff, Melchora
Cabanas. She was ten years old at the time the
complaint was filed on October 10, 1964. The
defendant, Francisco Pilapil, is the brother of
the deceased. The deceased insured himself
and instituted as beneficiary, his child, with his
brother to act as trustee during her minority.
Upon his death, the proceeds were paid to him.
Hence this complaint by the mother, with
whom the child is living, seeking the delivery of
such sum. She filed the bond required by the
Civil Code. Defendant would justify his claim to
the retention of the amount in question by
invoking the terms of the insurance policy. 2
After trial duly had, the lower court in a
decision of May 10, 1965, rendered judgment
ordering the defendant to deliver the proceeds
of the policy in question to plaintiff. Its main
reliance was on Articles 320 and 321 of the Civil
Code. The former provides: "The father, or in
his absence the mother, is the legal
administrator of the property pertaining to the
child under parental authority. If the property is
worth more than two thousand pesos, the
father or mother shall give a bond subject to
the approval of the Court of First
Instance." 3 The latter states: "The property
which the unemancipated child has acquired or
may acquire with his work or industry, or by any
lucrative title, belongs to the child in ownership,
and in usufruct to the father or mother under
whom he is under parental authority and whose
company he lives; ... 4
Conformity to such explicit codal norm is
apparent in this portion of the appealed
decision: "The insurance proceeds belong to the
beneficiary. The beneficiary is a minor under
the custody and parental authority of the
plaintiff, her mother. The said minor lives with
plaintiff or lives in the company of the plaintiff.
The said minor acquired this property by
lucrative title. Said property, therefore, belongs
to the minor child in ownership, and in usufruct
to the plaintiff, her mother. Since under our law
the usufructuary is entitled to possession, the
plaintiff is entitled to possession of the
insurance proceeds. The trust, insofar as it is in
conflict with the above quoted provision of law,
is pro tanto null and void. In order, however, to
protect the rights of the minor, Millian Pilapil,
the plaintiff should file an additional bond in the
guardianship proceedings, Sp. Proc. No. 2418-R
of this Court to raise her bond therein to the
total amount of P5,000.00." 5
It is very clear, therefore, considering the
above, that unless the applicability of the two
cited Civil Code provisions can be disputed, the
decision must stand. There is no ambiguity in
the language employed. The words are rather
clear. Their meaning is unequivocal. Time and
time again, this Court has left no doubt that
where codal or statutory norms are cast in
categorical language, the task before it is not
one of interpretation but of application. 6So it
must be in this case. So it was in the appealed
decision.
1. It would take more than just two paragraphs
as found in the brief for the defendant-
appellant 7 to blunt the force of legal commands
that speak so plainly and so unqualifiedly. Even
if it were a question of policy, the conclusion
will remain unaltered. What is paramount, as
mentioned at the outset, is the welfare of the
child. It is in consonance with such primordial
end that Articles 320 and 321 have been
worded. There is recognition in the law of the
deep ties that bind parent and child. In the
event that there is less than full measure of
concern for the offspring, the protection is
supplied by the bond required. With the added
circumstance that the child stays with the
mother, not the uncle, without any evidence of
lack of maternal care, the decision arrived at
can stand the test of the strictest scrutiny. It is
further fortified by the assumption, both logical
and natural, that infidelity to the trust imposed
by the deceased is much less in the case of a
mother than in the case of an uncle. Manresa,
commenting on Article 159 of the Civil Code of
Spain, the source of Article 320 of the Civil
Code, was of that view: Thus "El derecho y la
obligacion de administrar el Patrimonio de los
hijos es una consecuencia natural y lógica de la
patria potestad y de la presunción de que nadie
cuidará de los bienes de acquéllos con mas
cariño y solicitude que los padres. En nuestro
Derecho antiguo puede decirse que se hallaba
reconocida de una manera indirecta aquelia
doctrina, y asi se desprende de la sentencia del
Tribunal Supremeo de 30 de diciembre de 1864,
que se refiere a la ley 24, tit. XIII de la Partida 5.
De la propia suerte aceptan en general dicho
principio los Codigos extranjeros, con las
limitaciones y requisitos de que trataremos mis
adelante." 8
2. The appealed decision is supported by
another cogent consideration. It is buttressed
by its adherence to the concept that the
judiciary, as an agency of the State acting
as parens patriae, is called upon whenever a
pending suit of litigation affects one who is a
minor to accord priority to his best interest. It
may happen, as it did occur here, that family
relations may press their respective claims. It
would be more in consonance not only with the
natural order of things but the tradition of the
country for a parent to be preferred. it could
have been different if the conflict were
between father and mother. Such is not the
case at all. It is a mother asserting priority.
Certainly the judiciary as the instrumentality of
the State in its role of parens patriae, cannot
remain insensible to the validity of her plea. In a
recent case, 9 there is this quotation from an
opinion of the United States Supreme Court:
"This prerogative of parens patriae is inherent
in the supreme power of every State, whether
that power is lodged in a royal person or in the
legislature, and has no affinity to those arbitrary
powers which are sometimes exerted by
irresponsible monarchs to the great detriment
of the people and the destruction of their
liberties." What is more, there is this
constitutional provision vitalizing this concept.
It reads: "The State shall strengthen the family
as a basic social institution." 10 If, as the
Constitution so wisely dictates, it is the family as
a unit that has to be strengthened, it does not
admit of doubt that even if a stronger case were
presented for the uncle, still deference to a
constitutional mandate would have led the
lower court to decide as it did.
WHEREFORE, the decision of May 10, 1965 is
affirmed. Costs against defendant-appellant.
G.R. No. L-31685 July 31, 1975
RAMON A. GONZALES, petitioner,
vs.
IMELDA R. MARCOS, as Chairman of the Cultural Center of the Philippines, Father HORACIO DE LA
COSTA, I. P. SOLIONGCO, ERNESTO RUFINO, ANTONIO MADRIGAL, and ANDRES SORIANO, as
Members thereof, respondents.
Ramon A. Gonzales in his own behalf.
Acting Solicitor General Hugo E. Gutierrez; Jr. and Assistant Solicitor General Reynato S. Puno for
respondent Imelda R. Marcos.
Siguion Reyna, Montecillo, Beto and Ongsiako for respondents.
FERNANDO, J.:
It was the novelty of the constitutional question
raised, there being an imputation by petitioner
Ramon A. Gonzales of an impermissible
encroachment by the President of the
Philippines on the legislative prerogative, that
led this Tribunal to give due course to an appeal
by certiorari from an order of dismissal by the
Court of First Instance of Manila. 1 More
specifically, the issue centered on the validity of
the creation in Executive Order No. 30 of a trust
for the benefit of the Filipino people under the
name and style of the Cultural Center of the
Philippines entrusted with the task to construct
a national theatre, a national music hall, an arts
building and facilities, to awaken our people's
consciousness in the nation's cultural heritage
and to encourage its assistance in the
preservation, promotion, enhancement and
development thereof, with the Board of
Trustees to be appointed by the President, the
Center having as its estate the real and personal
property vested in it as well as donations
received, financial commitments that could
thereafter be collected, and gifts that may be
forthcoming in the future. 2 It was likewise
alleged that the Board of Trustees did accept
donations from the private sector and did
secure from the Chemical Bank of New York a
loan of $5 million guaranteed by the National
Investment & Development Corporation as well
as $3.5 million received from President Johnson
of the United States in the concept of war
damage funds, all intended for the construction
of the Cultural Center building estimated to cost
P48 million. The Board of Trustees has as its
Chairman the First Lady, Imelda Romualdez
Marcos, who is named as the principal
respondent. 3 In an order of dismissal by the
then Judge, now Justice of the Court of Appeals,
Jose G. Bautista of a suit for prohibition filed in
the Court of First Instance of Manila, stress was
laid on the funds administered by the Center as
coming from donations and contributions, with
not a single centavo raised by taxation, and the
absence of any pecuniary or monetary interest
of petitioner that could in any wise be
prejudiced distinct from those of the general
public. Moreover, reference was made to the
admission by petitioner of the desirability of the
objective of Executive Order No. 30, his
objection arising from the alleged illegality of its
issuance. 4
There was a motion of respondents to file a
motion to dismiss this appeal by certiorari, and
it was granted in a resolution of March 5, 1970.
Such a pleading was submitted to this Court
twelve days later, where it was contended that
Executive Order No. 30 represented the
legitimate exercise of executive power, there
being no invasion of the legislative domain and
that it was supplementary to rather than a
disregard of Republic Act No. 4165 creating the
National Commission on Culture. In this
exhaustive motion to dismiss, the point was
likewise raised that petitioner did not have the
requisite personality to contest as a taxpayer
the validity of the executive order in question,
as the funds held by the Cultural Center came
from donations and contributions, not one
centavo being raised by taxation. 5 Thereafter, a
manifestation was filed by the then Solicitor
General, now Associate Justice, Felix Q.
Antonio, adopting "the Motion to Dismiss the
Petition dated February 25, 1970, filed by
respondents with this Honorable Court." 6 There
was an opposition to such motion to dismiss on
the part of petitioner. 7 That was the status of
the case, there being no further pleadings filed
except two motions for extension of time to file
answer submitted by the Solicitor General and
granted by this Court, when on July 22, 1975,
there was a second motion to dismiss on the
part of respondents through the Acting Solicitor
General Hugo E. Gutierrez Jr. and Assistant
Solicitor General Reynato S. Puno. It is therein
set forth: "(1) As stated in the petition itself its
undeniable quintessence is [the allegation of]
"an executive usurpation of legislative powers,
hence, respondents in enforcing the same, are
acting without jurisdiction, hence, are
restrainable by prohibition." ... (2) On October
5, 1972, Presidential Decree No. 15 ... was
promulgated creating the Cultural Center of the
Philippines, defining its objectives, powers and
functions and other purposes. Section 4,
thereof was amended by Presidential Decree
No. 179 ... enacted on April 26, 1973. It is
submitted that it is now moot and academic to
discuss the constitutionality of Executive Order
No. 30 considering the promulgation of PD Nos.
15 and 179, done by the President in the
exercise of legislative powers under martial law.
Executive Order No. 30 has ceased to exist
while PD Nos. 15 and 179 meet all the
constitutional arguments raised in the petition
at bar." 8
It would thus appear that the petition cannot
succeed. There is no justification for setting
aside the order of dismissal. Notwithstanding
the exhaustive and scholarly pleadings
submitted by petitioner on his own behalf, the
burden of persuasion to warrant a reversal of
the action of the lower court was not met. Both
on procedural and substantive grounds, a case
for prohibition was not made out,
notwithstanding the valiant efforts of
petitioner. With this latest manifestation, that
Executive Order No. 30 had been superseded by
Presidential Decree Nos. 15 and 179, the moot
and academic character of this appeal by
certiorari became rather obvious. To repeat, the
petition must fail.
1. It may not be amiss though to consider
briefly both the procedural and substantive
grounds that led to the lower court's order of
dismissal. It was therein pointed out as "one
more valid reason" why such an outcome was
unavoidable that "the funds administered by
the President of the Philippines came from
donations [and] contributions [not] by
taxation." Accordingly, there was that absence
of the "requisite pecuniary or monetary
interest." 9 The stand of the lower court finds
support in judicial precedents. 10 This is not to
retreat from the liberal approach followed
inPascual v. Secretary of Public
Works, 11 foreshadowed by People v.
12
Vera, where the doctrine of standing was first
fully discussed. It is only to make clear that
petitioner, judged by orthodox legal learning,
has not satisfied the elemental requisite for a
taxpayer's suit. Moreover, even on the
assumption that public funds raised by taxation
were involved, it does not necessarily follow
that such kind of an action to assail the validity
of a legislative or executive act has to be passed
upon. This Court, as held in the recent case
of Tan v. Macapagal, 13 "is not devoid of
discretion as to whether or not it should be
entertained." 14 The lower court thus did not err
in so viewing the situation.
2. Nor was the lower court any more impressed
by the contention that there was an
encroachment on the legislative prerogative
discernible in the issuance of Executive Order
No. 30. It first took note of the exchange of
diplomatic notes between the Republic of the
Philippines and the United States as to the use
of a special fund coming from the latter for a
Philippine cultural development project. Then,
as set forth in the order of dismissal, it
explained why no constitutional objection could
be validly interposed. Thus: "When the
President, therefore, acted by disposing of a
matter of general concern (Section 63, Rev.
Adm. Code) in accord with the constitutional
injunction to promote arts and letters (Section
4, Article XIV, Constitution of the Philippines)
and issued Executive Order No. 30, he simply
carried out the purpose of the trust in
establishing the Cultural Center of the
Philippines as the instrumentality through
which this agreement between the two
governments would be realized. Needless to
state, the President alone cannot and need not
personally handle the duties of a trustee for and
in behalf of the Filipino people in relation with
this trust. He can do this by means of an
executive order by creating as he did, a group of
persons, who would receive and administer the
trust estate, responsible to the President. As
head of the State, as chief executive, as
spokesman in domestic and foreign affairs, in
behalf of the estate as parens patriae, it cannot
be successfully questioned that the President
has authority to implement for the benefit of
the Filipino people by creating the Cultural
Center consisting of private citizens to
administer the private contributions and
donations given not only by the United States
government but also by private persons." 15
There is impressive juridical support for the
stand taken by the lower court. Justice Malcolm
in Government of the Philippine Islands v.
Springer 16 took pains to emphasize: "Just as
surely as the duty of caring for governmental
property is neither judicial nor legislative in
character is it as surely executive." 17 It Would
be an unduly narrow or restrictive view of such
a principle if the public funds that accrued by
way of donation from the United States and
financial contributions for the Cultural Center
project could not be legally considered as
"governmental property." They may be
acquired under the concept of dominium, the
state as a persona in law not being deprived of
such an attribute, thereafter to be administered
by virtue of its prerogative of imperium. 18 What
is a more appropriate agency for assuring that
they be not wasted or frittered away than the
Executive, the department precisely entrusted
with management functions? It would thus
appear that for the President to refrain from
taking positive steps and await the action of the
then Congress could be tantamount to
dereliction of duty. He had to act; time was of
the essence. Delay was far from conducive to
public interest. It was as simple as that.
Certainly then, it could be only under the most
strained construction of executive power to
conclude that in taking the step he took, he
transgressed on terrain constitutionally
reserved for Congress.
This is not to preclude legislative action in the
premises. While to the Presidency under the
1935 Constitution was entrusted the
responsibility for administering public property,
the then Congress could provide guidelines for
such a task. Relevant in this connection is the
excerpt from an opinion of Justice Jackson
in Youngstown Sheet & Tube Co. v.
Sawyer: 19 "When the President acts in absence
of either a congressional grant or denial of
authority, he can only rely upon his own
independent powers, but there is a zone of
twilight in which he and Congress may have
concurrent authority, or in which its distribution
is uncertain. Therefore, congressional inertia,
indifference or quiescence may sometimes, at
least as a practical matter, enable, if not invite,
measures on independent presidential
responsibility. In this area, any actual test of
power is likely to depend on the imperative of
events and contemporary imponderables rather
than on abstract theories of law." 20 To vary the
phraseology, to recall Thomas Reed Powell, if
Congress would continue to keep its peace
notwithstanding the action taken by the
executive department, it may be considered as
silently vocal. In plainer language, it could be an
instance of silence meaning consent. The
Executive Order assailed was issued on June 25,
1966. Congress until the time of the filing of the
petition on August 26, 1969 remained
quiescent. Parenthetically, it may be observed
that petitioner waited until almost the day of
inaugurating the Cultural Center on September
11, 1969 before filing his petition in the lower
court. However worthy of commendation was
his resolute determination to keep the
Presidency within the bounds of its
competence, it cannot be denied that the
remedy, if any, could be supplied by Congress
asserting itself in the premises. Instead, there
was apparent conformity on its part to the way
the President saw fit to administer such
governmental property.
3. The futility of this appeal by certiorari
becomes even more apparent with the issuance
of Presidential Decree No. 15 on October 5,
1972. As contended by the Solicitor General,
the matter, as of that date, became moot and
academic. Executive Order No. 30 was thus
superseded. The institution known as the
Cultural Center is other than that assailed in this
suit. In that sense a coup de grace was
administered to this proceeding. The labored
attempt of petitioner could thus be set at rest.
This particular litigation is at an end. There is,
too, relevance in the observation that the
aforesaid decree is part of the law of the land.
So the Constitution provides. 21
4. It only remains to be added that respondents
as trustees lived up fully to the weighty
responsibility entrusted to them. The task
imposed on them was performed with
competence, fidelity, and dedication. That was
to be expected. From the inception of the
Marcos Administration, the First Lady has given
unsparingly of herself in the encouragement
and support of literary, musical, and artistic
endeavors and in the appreciation of our rich
and diverse cultural heritage. The rest of the
then Board of Trustees, named as the other
respondents, were equally deserving of their
being chosen for this worthy project. One of
them, the late I.P Soliongco, was in his lifetime
one of the most gifted men of letters. Father
Horacio de la Costa is a historian and scholar of
international repute. Respondents Ernesto
Rufino, Antonio Madrigal and Andres Soriano,
all men of substance, have contributed in time
and money to civic efforts. It is not surprising
then that the Cultural Center became a reality,
the massive and imposing structure constructed
at a shorter period and at a lower cost than at
first thought possible. What is of even greater
significance, with a portion thereof being
accessible at modest admission prices, musical
and artistic performances of all kinds are within
reach of the lower-income groups. Only thus
may meaning be imparted to the Constitutional
provision that arts and letters shall be under
G.R. No. L-5 September 17, 1945
CO KIM CHAM (alias CO KIM CHAM), petitioner,
vs.
EUSEBIO VALDEZ TAN KEH and ARSENIO P. DIZON, Judge of First Instance of Manila, respondents.1
Marcelino Lontok for petitioner.
P. A. Revilla for respondent Valdez Tan Keh.
Respondent Judge Dizon in his own behalf.
FERIA, J.:
This petition for mandamus in which petitioner
prays that the respondent judge of the lower
court be ordered to continue the proceedings in judicial proceedings pending in the courts of the
civil case No. 3012 of said court, which were
initiated under the regime of the so-called
Republic of the Philippines established during
the Japanese military occupation of these
Islands.
The respondent judge refused to take
cognizance of and continue the proceedings in
said case on the ground that the proclamation
issued on October 23, 1944, by General Douglas
MacArthur had the effect of invalidating and
nullifying all judicial proceedings and
judgements of the court of the Philippines
under the Philippine Executive Commission and
the Republic of the Philippines established
during the Japanese military occupation, and
State patronage. 22 For equally important as the
encouragement and support for talented
Filipinos with a creative spark is the diffusion of
the opportunity for the rest of their countrymen
to savour the finer things in life. Who knows, if
state efforts along these lines are diligently
pursued, that what was said by Justice Holmes
about France could apply to the Philippines.
Thus: "We have not that respect for art that is
one of the glories of France." 23 In justice to
petitioner Gonzales, it may be noted that he did
not question the wisdom or soundness of the
goal of having a Cultural Center or the
disbursement of the funds by respondents. It is
the absence of statutory authority that
bothered him. The lower court did not see
things in the same light. It is easily
understandable why, as the preceding
discussion has made clear, it cannot be said that
such a conclusion suffered from legal infirmity.
What is more, with the issuance of Presidential
Decree No. 15, the suit, to repeat, has assumed
a moot and academic character.
WHEREFORE, this appeal by certiorari to review
the lower court's order of dismissal dated
December 4, 1969 is dismissed.
that, furthermore, the lower courts have no
jurisdiction to take cognizance of and continue
defunct Republic of the Philippines in the
absence of an enabling law granting such
authority. And the same respondent, in his
answer and memorandum filed in this Court,
contends that the government established in
the Philippines during the Japanese occupation
were no de facto governments.
On January 2, 1942, the Imperial Japanese
Forces occupied the City of Manila, and on the
next day their Commander in Chief proclaimed
"the Military Administration under law over the
districts occupied by the Army." In said
proclamation, it was also provided that "so far
as the Military Administration permits, all the
laws now in force in the Commonwealth, as
well as executive and judicial institutions, shall
continue to be effective for the time being as in
the past," and "all public officials shall remain in
their present posts and carry on faithfully their
duties as before."
A civil government or central administration
organization under the name of "Philippine
Executive Commission was organized by Order
No. 1 issued on January 23, 1942, by the
Commander in Chief of the Japanese Forces in
the Philippines, and Jorge B. Vargas, who was
appointed Chairman thereof, was instructed to
proceed to the immediate coordination of the
existing central administrative organs and
judicial courts, based upon what had existed
therefore, with approval of the said
Commander in Chief, who was to exercise
jurisdiction over judicial courts.
The Chairman of the Executive Commission, as
head of the central administrative organization,
issued Executive Orders Nos. 1 and 4, dated
January 30 and February 5, 1942, respectively,
in which the Supreme Court, Court of Appeals,
Courts of First Instance, and the justices of the
peace and municipal courts under the
Commonwealth were continued with the same
jurisdiction, in conformity with the instructions
given to the said Chairman of the Executive
Commission by the Commander in Chief of
Japanese Forces in the Philippines in the latter's
Order No. 3 of February 20, 1942, concerning
basic principles to be observed by the Philippine
Executive Commission in exercising legislative,
executive and judicial powers. Section 1 of said
Order provided that "activities of the
administration organs and judicial courts in the
Philippines shall be based upon the existing
statutes, orders, ordinances and customs. . . ."
On October 14, 1943, the so-called Republic of
the Philippines was inaugurated, but no
substantial change was effected thereby in the
organization and jurisdiction of the different
courts that functioned during the Philippine
Executive Commission, and in the laws they
administered and enforced.
On October 23, 1944, a few days after the
historic landing in Leyte, General Douglas
MacArthur issued a proclamation to the People
of the Philippines which declared:
1. That the Government of the
Commonwealth of the Philippines is,
subject to the supreme authority of the
Government of the United States, the
sole and only government having legal
and valid jurisdiction over the people in
areas of the Philippines free of enemy
occupation and control;
2. That the laws now existing on the
statute books of the Commonwealth of
the Philippines and the regulations
promulgated pursuant thereto are in
full force and effect and legally binding
upon the people in areas of the
Philippines free of enemy occupation
and control; and
3. That all laws, regulations and
processes of any other government in
the Philippines than that of the said
Commonwealth are null and void and
without legal effect in areas of the
Philippines free of enemy occupation
and control.
On February 3, 1945, the City of Manila was
partially liberated and on February 27, 1945,
General MacArthur, on behalf of the
Government of the United States, solemnly
declared "the full powers and responsibilities
under the Constitution restored to the
Commonwealth whose seat is here established
as provided by law."
In the light of these facts and events of
contemporary history, the principal questions
to be resolved in the present case may be
reduced to the following:(1) Whether the
judicial acts and proceedings of the court
existing in the Philippines under the Philippine
Executive Commission and the Republic of the
Philippines were good and valid and remained
so even after the liberation or reoccupation of
the Philippines by the United States and Filipino
forces; (2)Whether the proclamation issued on
October 23, 1944, by General Douglas
MacArthur, Commander in Chief of the United
States Army, in which he declared "that all laws,
regulations and processes of any of the
government in the Philippines than that of the
said Commonwealth are null and void and
without legal effect in areas of the Philippines
free of enemy occupation and control," has
invalidated all judgements and judicial acts and
proceedings of the said courts; and (3) If the
said judicial acts and proceedings have not been
invalidated by said proclamation, whether the
present courts of the Commonwealth, which
were the same court existing prior to, and
continued during, the Japanese military
occupation of the Philippines, may continue
those proceedings pending in said courts at the
time the Philippines were reoccupied and
liberated by the United States and Filipino
forces, and the Commonwealth of the
Philippines were reestablished in the Islands.
We shall now proceed to consider the first
question, that is, whether or not under the
rules of international law the judicial acts and
proceedings of the courts established in the
Philippines under the Philippine Executive
Commission and the Republic of the Philippines
were good and valid and remained good and
valid even after the liberation or reoccupation
of the Philippines by the United States and
Filipino forces.
1. It is a legal truism in political and
international law that all acts and proceedings
of the legislative, executive, and judicial
departments of a de facto government are good
and valid. The question to be determined is
whether or not the governments established in
these Islands under the names of the Philippine
Executive Commission and Republic of the
Philippines during the Japanese military
occupation or regime were de
facto governments. If they were, the judicial
acts and proceedings of those governments
remain good and valid even after the liberation
or reoccupation of the Philippines by the
American and Filipino forces.
There are several kinds of de
facto governments. The first, or government de
facto in a proper legal sense, is that government
that gets possession and control of, or usurps,
by force or by the voice of the majority, the
rightful legal governments and maintains itself
against the will of the latter, such as the
government of England under the
Commonwealth, first by Parliament and later by
Cromwell as Protector. The second is that which
is established and maintained by military forces
who invade and occupy a territory of the enemy
in the course of war, and which is denominated
a government of paramount force, as the cases
of Castine, in Maine, which was reduced to
British possession in the war of 1812, and
Tampico, Mexico, occupied during the war with
Mexico, by the troops of the United States. And
the third is that established as an independent
government by the inhabitants of a country
who rise in insurrection against the parent state
of such as the government of the Southern
Confederacy in revolt not concerned in the
present case with the first kind, but only with
the second and third kinds of de
factogovernments.
Speaking of government "de facto" of the
second kind, the Supreme Court of the United
States, in the case of Thorington vs. Smith (8
Wall., 1), said: "But there is another description
of government, called also by publicists a
government de facto, but which might, perhaps,
be more aptly denominated a government of
paramount force. Its distinguishing
characteristics are (1), that its existence is
maintained by active military power with the
territories, and against the rightful authority of
an established and lawful government; and (2),
that while it exists it necessarily be obeyed in
civil matters by private citizens who, by acts of
obedience rendered in submission to such
force, do not become responsible, or
wrongdoers, for those acts, though not
warranted by the laws of the rightful
government. Actual governments of this sort
are established over districts differing greatly in
extent and conditions. They are usually
administered directly by military authority, but
they may be administered, also, civil authority,
supported more or less directly by military
force. . . . One example of this sort of
government is found in the case of Castine, in
Mine, reduced to British possession in the war
of 1812 . . . U. S. vs. Rice (4 Wheaton, 253). A
like example is found in the case of Tampico,
occupied during the war with Mexico, by the
troops of the United States . . . Fleming vs. Page
(9 Howard, 614). These were cases of
temporary possessions of territory by lawfull
and regular governments at war with the
country of which the territory so possessed was
part."
The powers and duties of de facto governments
of this description are regulated in Section III of
the Hague Conventions of 1907, which is a
revision of the provisions of the Hague
Conventions of 1899 on the same subject of
said Section III provides "the authority of the
legislative power having actually passed into the
hands of the occupant, the latter shall take
steps in his power to reestablish and insure, as
far as possible, public order and safety, while
respecting, unless absolutely prevented, the
laws in force in the country."
According to the precepts of the Hague
Conventions, as the belligerent occupant has
the right and is burdened with the duty to
insure public order and safety during his
military occupation, he possesses all the powers
of a de facto government, and he can
suspended the old laws and promulgate new
ones and make such changes in the old as he
may see fit, but he is enjoined to respect, unless
absolutely prevented by the circumstances
prevailing in the occupied territory, the
municipal laws in force in the country, that is,
those laws which enforce public order and
regulate social and commercial life of the
country. On the other hand, laws of a political
nature or affecting political relations, such as,
among others, the right of assembly, the right
to bear arms, the freedom of the press, and the
right to travel freely in the territory occupied,
are considered as suspended or in abeyance
during the military occupation. Although the
local and civil administration of justice is
suspended as a matter of course as soon as a
country is militarily occupied, it is not usual for
the invader to take the whole administration
into his own hands. In practice, the local
ordinary tribunals are authorized to continue
administering justice; and judges and other
judicial officers are kept in their posts if they
accept the authority of the belligerent occupant
or are required to continue in their positions
under the supervision of the military or civil
authorities appointed, by the Commander in
Chief of the occupant. These principles and
practice have the sanction of all publicists who
have considered the subject, and have been
asserted by the Supreme Court and applied by
the President of the United States.
The doctrine upon this subject is thus summed
up by Halleck, in his work on International Law
(Vol. 2, p. 444): "The right of one belligerent to
occupy and govern the territory of the enemy
while in its military possession, is one of the
incidents of war, and flows directly from the
right to conquer. We, therefore, do not look to
the Constitution or political institutions of the
conqueror, for authority to establish a
government for the territory of the enemy in his
possession, during its military occupation, nor
for the rules by which the powers of such
government are regulated and limited. Such
authority and such rules are derived directly
from the laws war, as established by the usage
of the of the world, and confirmed by the
writings of publicists and decisions of courts —
in fine, from the law of nations. . . . The
municipal laws of a conquered territory, or the
laws which regulate private rights, continue in
force during military occupation, excepts so far
as they are suspended or changed by the acts of
conqueror. . . . He, nevertheless, has all the
powers of a de facto government, and can at his
pleasure either change the existing laws or
make new ones."
And applying the principles for the exercise of
military authority in an occupied territory,
which were later embodied in the said Hague
Conventions, President McKinley, in his
executive order to the Secretary of War of May
19,1898, relating to the occupation of the
Philippines by United States forces, said in part:
"Though the powers of the military occupant
are absolute and supreme, and immediately
operate upon the political condition of the
inhabitants, the municipal laws of the
conquered territory, such as affect private
rights of person and property and provide for
the punishment of crime, are considered as
continuing in force, so far as they are
compatible with the new order of things, until
they are suspended or superseded by the
occupying belligerent; and in practice they are
not usually abrogated, but are allowed to
remain in force and to be administered by the
ordinary tribunals, substantially as they were
before the occupation. This enlightened
practice is, so far as possible, to be adhered to
on the present occasion. The judges and the
other officials connected with the
administration of justice may, if they accept the
authority of the United States, continue to
administer the ordinary law of the land as
between man and man under the supervision of
the American Commander in Chief."
(Richardson's Messages and Papers of
President, X, p. 209.)
As to "de facto" government of the third kind,
the Supreme Court of the United States, in the
same case of Thorington vs. Smith, supra,
recognized the government set up by the
Confederate States as a de factogovernment. In
that case, it was held that "the central
government established for the insurgent States
differed from the temporary governments at
Castine and Tampico in the circumstance that
its authority did no originate in lawful acts of
regular war; but it was not, on the account, less
actual or less supreme. And we think that it
must be classed among the governments of
which these are examples. . . .
In the case of William vs. Bruffy (96 U. S. 176,
192), the Supreme Court of the United States,
discussing the validity of the acts of the
Confederate States, said: "The same general
form of government, the same general laws for
the administration of justice and protection of
private rights, which had existed in the States
prior to the rebellion, remained during its
continuance and afterwards. As far as the Acts
of the States do not impair or tend to impair the
supremacy of the national authority, or the just
rights of citizens under the Constitution, they
are, in general, to be treated as valid and
binding. As we said in Horn vs. Lockhart (17
Wall., 570; 21 Law. ed., 657): "The existence of
a state of insurrection and war did not loosen
the bonds of society, or do away with civil
government or the regular administration of the
laws. Order was to be preserved, police
regulations maintained, crime prosecuted,
property protected, contracts enforced,
marriages celebrated, estates settled, and the
transfer and descent of property regulated,
precisely as in the time of peace. No one, that
we are aware of, seriously questions the validity
of judicial or legislative Acts in the
insurrectionary States touching these and
kindered subjects, where they were not hostile
in their purpose or mode of enforcement to the
authority of the National Government, and did
not impair the rights of citizens under the
Constitution'. The same doctrine has been
asserted in numerous other cases."
And the same court, in the case of
Baldy vs. Hunter (171 U. S., 388, 400), held:
"That what occured or was done in respect of
such matters under the authority of the laws of
these local de facto governments should not be
disregarded or held to be
invalid merely because those governments were
organized in hostility to the Union established
by the national Constitution; this, because the
existence of war between the United States and
the Confederate States did not relieve those
who are within the insurrectionary lines from
the necessity of civil obedience, nor destroy the
bonds of society nor do away with civil
government or the regular administration of the
laws, and because transactions in the ordinary
course of civil society as organized within the
enemy's territory although they may have
indirectly or remotely promoted the ends of
the de facto or unlawful government organized
to effect a dissolution of the Union, were
without blame 'except when proved to have
been entered intowith actual intent to further
invasion or insurrection:'" and "That judicial and
legislative acts in the respective states
composing the so-called Confederate States
should be respected by the courts if they were
not hostile in their purpose or mode of
enforcement to the authority of the National
Government, and did not impair the rights of
citizens under the Constitution."
In view of the foregoing, it is evident that the
Philippine Executive Commission, which was
organized by Order No. 1, issued on January 23,
1942, by the Commander of the Japanese
forces, was a civil government established by
the military forces of occupation and therefore
a de facto government of the second kind. It
was not different from the government
established by the British in Castine, Maine, or
by the United States in Tampico, Mexico. As
Halleck says, "The government established over
an enemy's territory during the military
occupation may exercise all the powers given by
the laws of war to the conqueror over the
conquered, and is subject to all restrictions
which that code imposes. It is of little
consequence whether such government be
called a military or civil government. Its
character is the same and the source of its
authority the same. In either case it is a
government imposed by the laws of war, and so
far it concerns the inhabitants of such territory
or the rest of the world, those laws alone
determine the legality or illegality of its acts."
(Vol. 2, p. 466.) The fact that the Philippine
Executive Commission was a civil and not a
military government and was run by Filipinos
and not by Japanese nationals, is of no
consequence. In 1806, when Napoleon
occupied the greater part of Prussia, he
retained the existing administration under the
general direction of a french official (Langfrey
History of Napoleon, 1, IV, 25); and, in the same
way, the Duke of Willington, on invading
France, authorized the local authorities to
continue the exercise of their functions,
apparently without appointing an English
superior. (Wellington Despatches, XI, 307.). The
Germans, on the other hand, when they
invaded France in 1870, appointed their own
officials, at least in Alsace and Lorraine, in every
department of administration and of every
rank. (Calvo, pars. 2186-93; Hall, International
Law, 7th ed., p. 505, note 2.)
The so-called Republic of the Philippines,
apparently established and organized as a
sovereign state independent from any other
government by the Filipino people, was, in truth
and reality, a government established by the
belligerent occupant or the Japanese forces of
occupation. It was of the same character as the
Philippine Executive Commission, and the
ultimate source of its authority was the same —
the Japanese military authority and
government. As General MacArthur stated in
his proclamation of October 23, 1944, a portion
of which has been already quoted, "under
enemy duress, a so-called government styled as
the 'Republic of the Philippines' was established
on October 14, 1943, based upon neither the
free expression of the people's will nor the
sanction of the Government of the United
States." Japan had no legal power to grant
independence to the Philippines or transfer the
sovereignty of the United States to, or
recognize the latent sovereignty of, the Filipino
people, before its military occupation and
possession of the Islands had matured into an
absolute and permanent dominion or
sovereignty by a treaty of peace or other means
recognized in the law of nations. For it is a well-
established doctrine in International Law,
recognized in Article 45 of the Hauge
Conventions of 1907 (which prohibits
compulsion of the population of the occupied
territory to swear allegiance to the hostile
power), the belligerent occupation, being
essentially provisional, does not serve to
transfer sovereignty over the territory
controlled although the de jure government is
during the period of occupancy deprived of the
power to exercise its rights as such. (Thirty
Hogshead of Sugar vs. Boyle, 9 Cranch, 191;
United States vs. Rice, 4 Wheat., 246;
Fleming vs.Page, 9 Howard, 603;
Downes vs. Bidwell, 182 U. S., 345.) The
formation of the Republic of the Philippines was
a scheme contrived by Japan to delude the
Filipino people into believing in the apparent
magnanimity of the Japanese gesture of
transferring or turning over the rights of
government into the hands of Filipinos. It was
established under the mistaken belief that by
doing so, Japan would secure the cooperation
or at least the neutrality of the Filipino people
in her war against the United States and other
allied nations.
Indeed, even if the Republic of the Philippines
had been established by the free will of the
Filipino who, taking advantage of the
withdrawal of the American forces from the
Islands, and the occupation thereof by the
Japanese forces of invasion, had organized an
independent government under the name with
the support and backing of Japan, such
government would have been considered as
one established by the Filipinos in insurrection
or rebellion against the parent state or the
Unite States. And as such, it would have been
a de facto government similar to that organized
by the confederate states during the war of
secession and recognized as such by the by the
Supreme Court of the United States in
numerous cases, notably those of
Thorington vs. Smith, Williams vs.Bruffy, and
Badly vs. Hunter, above quoted; and similar to
the short-lived government established by the
Filipino insurgents in the Island of Cebu during
the Spanish-American war, recognized as a de
facto government by the Supreme Court of the
United States in the case of McCleod vs. United
States (299 U. S., 416). According to the facts in
the last-named case, the Spanish forces
evacuated the Island of Cebu on December 25,
1898, having first appointed a provisional
government, and shortly afterwards, the
Filipinos, formerly in insurrection against Spain,
took possession of the Islands and established a
republic, governing the Islands until possession
thereof was surrendered to the United States
on February 22, 1898. And the said Supreme
Court held in that case that "such
government was of the class of de
facto governments described in I Moore's
International Law Digest, S 20, . . . 'called also
by publicists a government de facto, but which
might, perhaps, be more aptly denominated a
government of paramount force . . '." That is to
say, that the government of a country in
possession of belligerent forces in insurrection
or rebellion against the parent state, rests upon
the same principles as that of a territory
occupied by the hostile army of an enemy at
regular war with the legitimate power.
The governments by the Philippine Executive
Commission and the Republic of the Philippines
during the Japanese military occupation
being de facto governments, it necessarily
follows that the judicial acts and proceedings of
the courts of justice of those governments,
which are not of a political complexion, were
good and valid, and, by virtue of the well-known
principle of postliminy (postliminium) in
international law, remained good and valid
after the liberation or reoccupation of the
Philippines by the American and Filipino forces
under the leadership of General Douglas
MacArthur. According to that well-known
principle in international law, the fact that a
territory which has been occupied by an enemy
comes again into the power of its legitimate
government of sovereignty, "does not, except in
a very few cases, wipe out the effects of acts
done by an invader, which for one reason or
another it is within his competence to do. Thus
judicial acts done under his control, when they
are not of a political complexion, administrative
acts so done, to the extent that they take effect
during the continuance of his control, and the
various acts done during the same time by
private persons under the sanction of municipal
law, remain good. Were it otherwise, the whole
social life of a community would be paralyzed
by an invasion; and as between the state and
the individuals the evil would be scarcely less,
— it would be hard for example that payment
of taxes made under duress should be ignored,
and it would be contrary to the general interest
that the sentences passed upon criminals
should be annulled by the disappearance of the
intrusive government ." (Hall, International Law,
7th ed., p. 518.) And when the occupation and
the abandonment have been each an incident
of the same war as in the present case,
postliminy applies, even though the occupant
has acted as conqueror and for the time
substituted his own sovereignty as the Japanese
intended to do apparently in granting
independence to the Philippines and
establishing the so-called Republic of the
Philippines. (Taylor, International Law, p. 615.)
That not only judicial but also legislative acts
of de facto governments, which are not of a
political complexion, are and remain valid after
reoccupation of a territory occupied by a
belligerent occupant, is confirmed by the
Proclamation issued by General Douglas
MacArthur on October 23, 1944, which declares
null and void all laws, regulations and processes
of the governments established in the
Philippines during the Japanese occupation, for
it would not have been necessary for said
proclamation to abrogate them if they were
invalid ab initio.
2. The second question hinges upon the
interpretation of the phrase "processes of any
other government" as used in the above-quoted
proclamation of General Douglas MacArthur of
October 23, 1944 — that is, whether it was the
intention of the Commander in Chief of the
American Forces to annul and void thereby all
judgments and judicial proceedings of the
courts established in the Philippines during the
Japanese military occupation.
The phrase "processes of any other
government" is broad and may refer not only to
the judicial processes, but also to administrative
or legislative, as well as constitutional,
processes of the Republic of the Philippines or
other governmental agencies established in the
Islands during the Japanese occupation. Taking
into consideration the fact that, as above
indicated, according to the well-known
principles of international law all judgements
and judicial proceedings, which are not of a
political complexion, of the de
facto governments during the Japanese military
occupation were good and valid before and
remained so after the occupied territory had
come again into the power of the titular
sovereign, it should be presumed that it was
not, and could not have been, the intention of
General Douglas MacArthur, in using the phrase
"processes of any other government" in said
proclamation, to refer to judicial processes, in
violation of said principles of international law.
The only reasonable construction of the said
phrase is that it refers to governmental
processes other than judicial processes of court
proceedings, for according to a well-known rule
of statutory construction, set forth in 25 R. C. L.,
p. 1028, "a statute ought never to be construed
to violate the law of nations if any other
possible construction remains."
It is true that the commanding general of a
belligerent army of occupation, as an agent of
his government, may not unlawfully suspend
existing laws and promulgate new ones in the
occupied territory, if and when the exigencies
of the military occupation demand such action.
But even assuming that, under the law of
nations, the legislative power of a commander
in chief of military forces who liberates or
reoccupies his own territory which has been
occupied by an enemy, during the military and
before the restoration of the civil regime, is as
broad as that of the commander in chief of the
military forces of invasion and occupation
(although the exigencies of military
reoccupation are evidently less than those of
occupation), it is to be presumed that General
Douglas MacArthur, who was acting as an agent
or a representative of the Government and the
President of the United States, constitutional
commander in chief of the United States Army,
did not intend to act against the principles of
the law of nations asserted by the Supreme
Court of the United States from the early period
of its existence, applied by the Presidents of the
United States, and later embodied in the Hague
Conventions of 1907, as above indicated. It is
not to be presumed that General Douglas
MacArthur, who enjoined in the same
proclamation of October 23, 1944, "upon the
loyal citizens of the Philippines full respect and
obedience to the Constitution of the
Commonwealth of the Philippines," should not
only reverse the international policy and
practice of his own government, but also
disregard in the same breath the provisions of
section 3, Article II, of our Constitution, which
provides that "The Philippines renounces war as
an instrument of national policy, and adopts the
generally accepted principles of international
law as part of the law of the Nation."
Moreover, from a contrary construction great
inconvenience and public hardship would
result, and great public interests would be
endangered and sacrificed, for disputes or suits
already adjudged would have to be again
settled accrued or vested rights nullified,
sentences passed on criminals set aside, and
criminals might easily become immune for
evidence against them may have already
disappeared or be no longer available,
especially now that almost all court records in
the Philippines have been destroyed by fire as a
consequence of the war. And it is another well-
established rule of statutory construction that
where great inconvenience will result from a
particular construction, or great public interests
would be endangered or sacrificed, or great
mischief done, such construction is to be
avoided, or the court ought to presume that
such construction was not intended by the
makers of the law, unless required by clear and
unequivocal words. (25 R. C. L., pp. 1025, 1027.)
The mere conception or thought of possibility
that the titular sovereign or his representatives
who reoccupies a territory occupied by an
enemy, may set aside or annul all the judicial
acts or proceedings of the tribunals which the
belligerent occupant had the right and duty to
establish in order to insure public order and
safety during military occupation, would be
sufficient to paralyze the social life of the
country or occupied territory, for it would have
to be expected that litigants would not willingly
submit their litigation to courts whose
judgements or decisions may afterwards be
annulled, and criminals would not be deterred
from committing crimes or offenses in the
expectancy that they may escaped the penalty
if judgments rendered against them may be
afterwards set aside.
That the proclamation has not invalidated all
the judgements and proceedings of the courts
of justice during the Japanese regime, is
impliedly confirmed by Executive Order No. 37,
which has the force of law, issued by the
President of the Philippines on March 10, 1945,
by virtue of the emergency legislative power
vested in him by the Constitution and the laws
of the Commonwealth of the Philippines. Said
Executive order abolished the Court of Appeals,
and provided "that all case which have
heretofore been duly appealed to the Court of
Appeals shall be transmitted to the Supreme
Court final decision." This provision impliedly
recognizes that the judgments and proceedings
of the courts during the Japanese military
occupation have not been invalidated by the
proclamation of General MacArthur of October
23, because the said Order does not say or refer
to cases which have been duly appealed to said
court prior to the Japanese occupation, but to
cases which had therefore, that is, up to March
10, 1945, been duly appealed to the Court of
Appeals; and it is to be presumed that almost
all, if not all, appealed cases pending in the
Court of Appeals prior to the Japanese military
occupation of Manila on January 2, 1942, had
been disposed of by the latter before the
restoration of the Commonwealth Government
in 1945; while almost all, if not all, appealed
cases pending on March 10, 1945, in the Court
of Appeals were from judgments rendered by
the Court of First Instance during the Japanese
regime.
The respondent judge quotes a portion of
Wheaton's International Law which say:
"Moreover when it is said that an occupier's
acts are valid and under international law
should not be abrogated by the subsequent
conqueror, it must be remembered that no
crucial instances exist to show that if his acts
should be reversed, any international wrong
would be committed. What does happen is that
most matters are allowed to stand by the
restored government, but the matter can hardly
be put further than this." (Wheaton,
International Law, War, 7th English edition of
1944, p. 245.) And from this quotion the
respondent judge "draws the conclusion that
whether the acts of the occupant should be
considered valid or not, is a question that is up
to the restored government to decide; that
there is no rule of international law that denies
to the restored government to decide; that
there is no rule of international law that denies
to the restored government the right of
exercise its discretion on the matter, imposing
upon it in its stead the obligation of recognizing
and enforcing the acts of the overthrown
government."
There is doubt that the subsequent conqueror
has the right to abrogate most of the acts of the
occupier, such as the laws, regulations and
processes other than judicial of the government
established by the belligerent occupant. But in
view of the fact that the proclamation uses the
words "processes of any other government"
and not "judicial processes" prisely, it is not
necessary to determine whether or not General
Douglas MacArthur had power to annul and set
aside all judgments and proceedings of the
courts during the Japanese occupation. The
question to be determined is whether or not it
was his intention, as representative of the
President of the United States, to avoid or
nullify them. If the proclamation had, expressly
or by necessary implication, declared null and
void the judicial processes of any other
government, it would be necessary for this
court to decide in the present case whether or
not General Douglas MacArthur had authority
to declare them null and void. But the
proclamation did not so provide, undoubtedly
because the author thereof was fully aware of
the limitations of his powers as Commander in
Chief of Military Forces of liberation or
subsequent conqueror.
Not only the Hague Regulations, but also the
principles of international law, as they result
from the usages established between civilized
nations, the laws of humanity and the
requirements of the public of conscience,
constitute or from the law of nations.
(Preamble of the Hague Conventions; Westlake,
International Law, 2d ed., Part II, p. 61.) Article
43, section III, of the Hague Regulations or
Conventions which we have already quoted in
discussing the first question, imposes upon the
occupant the obligation to establish courts; and
Article 23 (h), section II, of the same
Conventions, which prohibits the belligerent
occupant "to declare . . . suspended . . . in a
Court of Law the rights and action of the
nationals of the hostile party," forbids him to
make any declaration preventing the
inhabitants from using their courts to assert or
enforce their civil rights. (Decision of the Court
of Appeals of England in the case of
Porter vs. Fruedenburg, L.R. [1915], 1 K.B., 857.)
If a belligerent occupant is required to establish
courts of justice in the territory occupied, and
forbidden to prevent the nationals thereof from
asserting or enforcing therein their civil rights,
by necessary implication, the military
commander of the forces of liberation or the
restored government is restrained from
nullifying or setting aside the judgments
rendered by said courts in their litigation during
the period of occupation. Otherwise, the
purpose of these precepts of the Hague
Conventions would be thwarted, for to declare
them null and void would be tantamount to
suspending in said courts the right and action of
the nationals of the territory during the military
occupation thereof by the enemy. It goes
without saying that a law that enjoins a person
to do something will not at the same time
empower another to undo the same. Although
the question whether the President or
commanding officer of the United States Army
has violated restraints imposed by the
constitution and laws of his country is obviously
of a domestic nature, yet, in construing and
applying limitations imposed on the executive
authority, the Supreme Court of the United
States, in the case of Ochoa, vs. Hernandez (230
U.S., 139), has declared that they "arise from
general rules of international law and from
fundamental principles known wherever the
American flag flies."
In the case of Raymond vs. Thomas (91 U.S.,
712), a special order issued by the officer in
command of the forces of the United States in
South Carolina after the end of the Civil War,
wholly annulling a decree rendered by a court
of chancery in that state in a case within its
jurisdiction, was declared void, and not
warranted by the acts approved respectively
March 2, 1867 (14 Stat., 428), and July 19 of the
same year (15 id., 14), which defined the
powers and duties of military officers in
command of the several states then lately in
rebellion. In the course of its decision the court
said; "We have looked carefully through the
acts of March 2, 1867 and July 19, 1867. They
give very large governmental powers to the
military commanders designated, within the
States committed respectively to their
jurisdiction; but we have found nothing to
warrant the order here in question. . . . The
clearest language would be necessary to satisfy
us that Congress intended that the power given
by these acts should be so exercised. . . . It was
an arbitrary stretch of authority, needful to no
good end that can be imagined. Whether
Congress could have conferred the power to do
such an act is a question we are not called upon
to consider. It is an unbending rule of law that
the exercise of military power, where the rights
of the citizen are concerned, shall never be
pushed beyond what the exigency requires.
(Mithell vs. Harmony, 13 How., 115;
Warden vs. Bailey, 4 Taunt., 67;
Fabrigas vs. Moysten, 1 Cowp., 161; s.c., 1
Smith's L.C., pt. 2, p. 934.) Viewing the subject
before us from the standpoint indicated, we
hold that the order was void."
It is, therefore, evident that the proclamation of
General MacArthur of October 23, 1944, which
declared that "all laws, regulations and
processes of any other government in the
Philippines than that of the said Commonwealth
are null and void without legal effect in areas of
the Philippines free of enemy occupation and
control," has not invalidated the judicial acts
and proceedings, which are not a political
complexion, of the courts of justice in the
Philippines that were continued by the
Philippine Executive Commission and the
Republic of the Philippines during the Japanese
military occupation, and that said judicial acts
and proceedings were good and valid before
and now good and valid after the reoccupation
of liberation of the Philippines by the American
and Filipino forces.
3. The third and last question is whether or not
the courts of the Commonwealth, which are the
same as those existing prior to, and continued
during, the Japanese military occupation by the
Philippine Executive Commission and by the so-
called Republic of the Philippines, have
jurisdiction to continue now the proceedings in
actions pending in said courts at the time the
Philippine Islands were reoccupied or liberated
by the American and Filipino forces, and the
Commonwealth Government was restored.
Although in theory the authority the authority
of the local civil and judicial administration is
suspended as a matter of course as soon as
military occupation takes place, in practice the
invader does not usually take the
administration of justice into his own hands, but
continues the ordinary courts or tribunals to
administer the laws of the country which he is
enjoined, unless absolutely prevented, to
respect. As stated in the above-quoted
Executive Order of President McKinley to the
Secretary of War on May 19, 1898, "in practice,
they (the municipal laws) are not usually
abrogated but are allowed to remain in force
and to be administered by the ordinary
tribunals substantially as they were before the
occupation. This enlightened practice is, so far
as possible, to be adhered to on the present
occasion." And Taylor in this connection says:
"From a theoretical point of view it may be said
that the conqueror is armed with the right to
substitute his arbitrary will for all preexisting
forms of government, legislative, executive and
judicial. From the stand-point of actual practice
such arbitrary will is restrained by the provision
of the law of nations which compels the
conqueror to continue local laws and institution
so far as military necessity will permit." (Taylor,
International Public Law, p.596.) Undoubtedly,
this practice has been adopted in order that the
ordinary pursuits and business of society may
not be unnecessarily deranged, inasmuch as
belligerent occupation is essentially provisional,
and the government established by the
occupant of transient character.
Following these practice and precepts of the
law of nations, Commander in Chief of the
Japanese Forces proclaimed on January 3, 1942,
when Manila was occupied, the military
administration under martial law over the
territory occupied by the army, and ordered
that "all the laws now in force in the
Commonwealth, as well as executive and
judicial institutions, shall continue to be
affective for the time being as in the past," and
"all public officials shall remain in their present
post and carry on faithfully their duties as
before." When the Philippine Executive
Commission was organized by Order No. 1 of
the Japanese Commander in Chief, on January
23, 1942, the Chairman of the Executive
Commission, by Executive Orders Nos. 1 and 4
of January 30 and February 5, respectively,
continued the Supreme Court, Court of Appeals,
Court of First Instance, and justices of the peace
of courts, with the same jurisdiction in
conformity with the instructions given by the
Commander in Chief of the Imperial Japanese
Army in Order No. 3 of February 20, 1942. And
on October 14, 1943 when the so-called
Republic of the Philippines was inaugurated, the
same courts were continued with no substantial
change in organization and jurisdiction thereof.
If the proceedings pending in the different
courts of the Islands prior to the Japanese
military occupation had been continued during
the Japanese military administration, the
Philippine Executive Commission, and the so-
called Republic of the Philippines, it stands to
reason that the same courts, which had become
reestablished and conceived of as having in
continued existence upon the reoccupation and
liberation of the Philippines by virtue of the
principle of postliminy (Hall, International Law,
7th ed., p. 516), may continue the proceedings
in cases then pending in said courts, without
necessity of enacting a law conferring
jurisdiction upon them to continue said
proceedings. As Taylor graphically points out in
speaking of said principles "a state or other
governmental entity, upon the removal of a
foreign military force, resumes its old place with
its right and duties substantially unimpaired. . . .
Such political resurrection is the result of a law
analogous to that which enables elastic bodies
to regain their original shape upon removal of
the external force, — and subject to the same
exception in case of absolute crushing of the
whole fibre and content." (Taylor, International
Public Law, p. 615.)
The argument advanced by the respondent
judge in his resolution in support in his
conclusion that the Court of First Instance of
Manila presided over by him "has no authority
to take cognizance of, and continue said
proceedings (of this case) to final judgment
until and unless the Government of the
Commonwealth of the Philippines . . . shall have
provided for the transfer of the jurisdiction of
the courts of the now defunct Republic of the
Philippines, and the cases commenced and the
left pending therein," is "that said courts were a
government alien to the Commonwealth
Government. The laws they enforced were, true
enough, laws of the Commonwealth prior to
Japanese occupation, but they had become the
laws — and the courts had become the
institutions — of Japan by adoption
(U.S. vs. Reiter. 27 F. Cases, No. 16146), as they
became later on the laws and institutions of the
Philippine Executive Commission and the
Republic of the Philippines."
The court in the said case of U.S. vs. Reiter did
not and could not say that the laws and
institutions of the country occupied if continued
by the conqueror or occupant, become the laws
and the courts, by adoption, of the sovereign
nation that is militarily occupying the territory.
Because, as already shown, belligerent or
military occupation is essentially provisional and
does not serve to transfer the sovereignty over
the occupied territory to the occupant. What
the court said was that, if such laws and
institutions are continued in use by the
occupant, they become his and derive their
force from him, in the sense that he may
continue or set them aside. The laws and
institution or courts so continued remain the
laws and institutions or courts of the occupied
territory. The laws and the courts of the
Philippines, therefore, did not become, by being
continued as required by the law of nations,
laws and courts of Japan. The provision of
Article 45, section III, of the Hague Conventions
of 1907 which prohibits any compulsion of the
population of occupied territory to swear
allegiance to the hostile power, "extends to
prohibit everything which would assert or imply
a change made by the invader in the legitimate
sovereignty. This duty is neither to innovate in
the political life of the occupied districts, nor
needlessly to break the continuity of their legal
life. Hence, so far as the courts of justice are
allowed to continue administering the territorial
laws, they must be allowed to give their
sentences in the name of the legitimate
sovereign " (Westlake, Int. Law, Part II, second
ed., p. 102). According to Wheaton, however,
the victor need not allow the use of that of the
legitimate government. When in 1870, the
Germans in France attempted to violate that
rule by ordering, after the fall of the Emperor
Napoleon, the courts of Nancy to administer
justice in the name of the "High German Powers
occupying Alsace and Lorraine," upon the
ground that the exercise of their powers in the
name of French people and government was at
least an implied recognition of the Republic, the
courts refused to obey and suspended their
sitting. Germany originally ordered the use of
the name of "High German Powers occupying
Alsace and Lorraine," but later offered to allow
use of the name of the Emperor or a
compromise. (Wheaton, International Law,
War, 7th English ed. 1944, p. 244.)
Furthermore, it is a legal maxim, that excepting
that of a political nature, "Law once established
continues until changed by the some
competent legislative power. It is not change
merely by change of sovereignty." (Joseph H.
Beale, Cases on Conflict of Laws, III, Summary
Section 9, citing Commonwealth vs. Chapman,
13 Met., 68.) As the same author says, in his
Treatise on the Conflict on Laws (Cambridge,
1916, Section 131): "There can no break or
interregnum in law. From the time the law
comes into existence with the first-felt
corporateness of a primitive people it must last
until the final disappearance of human society.
Once created, it persists until a change take
place, and when changed it continues in such
changed condition until the next change, and so
forever. Conquest or colonization is impotent to
bring law to an end; in spite of change of
constitution, the law continues unchanged until
the new sovereign by legislative acts creates a
change."
As courts are creatures of statutes and their
existence defends upon that of the laws which
create and confer upon them their jurisdiction,
it is evident that such laws, not being a political
nature, are not abrogated by a change of
sovereignty, and continue in force "ex proprio
vigore" unless and until repealed by legislative
acts. A proclamation that said laws and courts
are expressly continued is not necessary in
order that they may continue in force. Such
proclamation, if made, is but a declaration of
the intention of respecting and not repealing
those laws. Therefore, even assuming that
Japan had legally acquired sovereignty over
these Islands, which she had afterwards
transferred to the so-called Republic of the
Philippines, and that the laws and the courts of
these Islands had become the courts of Japan,
as the said courts of the laws creating and
conferring jurisdiction upon them have
continued in force until now, it necessarily
follows that the same courts may continue
exercising the same jurisdiction over cases
pending therein before the restoration of the
Commonwealth Government, unless and until
they are abolished or the laws creating and
conferring jurisdiction upon them are repealed
by the said government. As a consequence,
enabling laws or acts providing that proceedings
pending in one court be continued by or
transferred to another court, are not required
by the mere change of government or
sovereignty. They are necessary only in case the
former courts are abolished or their jurisdiction
so change that they can no longer continue
taking cognizance of the cases and proceedings
commenced therein, in order that the new
courts or the courts having jurisdiction over said
cases may continue the proceedings. When the
Spanish sovereignty in the Philippine Islands
ceased and the Islands came into the
possession of the United States, the "Audiencia"
or Supreme Court was continued and did not
cease to exist, and proceeded to take
cognizance of the actions pending therein upon
the cessation of the Spanish sovereignty until
the said "Audiencia" or Supreme Court was
abolished, and the Supreme Court created in
Chapter II of Act No. 136 was substituted in lieu
thereof. And the Courts of First Instance of the
Islands during the Spanish regime continued
taking cognizance of cases pending therein
upon the change of sovereignty, until section 65
of the same Act No. 136 abolished them and
created in its Chapter IV the present Courts of
First Instance in substitution of the former.
Similarly, no enabling acts were enacted during
the Japanese occupation, but a mere
proclamation or order that the courts in the
Island were continued.
On the other hand, during the American regime,
when section 78 of Act No. 136 was enacted
abolishing the civil jurisdiction of the provost
courts created by the military government of
occupation in the Philippines during the
Spanish-American War of 1898, the same
section 78 provided for the transfer of all civil
actions then pending in the provost courts to
the proper tribunals, that is, to the justices of
the peace courts, Court of First Instance, or
Supreme Court having jurisdiction over them
according to law. And later on, when the
criminal jurisdiction of provost courts in the City
of Manila was abolished by section 3 of Act No.
186, the same section provided that criminal
cases pending therein within the jurisdiction of
the municipal court created by Act No. 183
were transferred to the latter.
That the present courts as the same courts
which had been functioning during the
Japanese regime and, therefore, can continue
the proceedings in cases pending therein prior
to the restoration of the Commonwealth of the
Philippines, is confirmed by Executive Order No.
37 which we have already quoted in support of
our conclusion in connection with the second
question. Said Executive Order provides"(1) that
the Court of Appeals created and established
under Commonwealth Act No. 3 as amended,
be abolished, as it is hereby abolished," and "(2)
that all cases which have heretofore been duly
appealed to the Court of Appeals shall be
transmitted to the Supreme Court for final
decision. . . ." In so providing, the said Order
considers that the Court of Appeals abolished
was the same that existed prior to, and
continued after, the restoration of the
Commonwealth Government; for, as we have
stated in discussing the previous question,
almost all, if not all, of the cases pending
therein, or which had theretofore (that is, up to
March 10, 1945) been duly appealed to said
court, must have been cases coming from the
Courts of First Instance during the so-called
Republic of the Philippines. If the Court of
Appeals abolished by the said Executive Order
Separate Opinions
DE JOYA, J., concurring:
was not the same one which had been
functioning during the Republic, but that which
had existed up to the time of the Japanese
occupation, it would have provided that all the
cases which had, prior to and up to that
occupation on January 2, 1942, been dully
appealed to the said Court of Appeals shall be
transmitted to the Supreme Court for final
decision.
It is, therefore, obvious that the present courts
have jurisdiction to continue, to final judgment,
the proceedings in cases, not of political
complexion, pending therein at the time of the
restoration of the Commonwealth Government.
Having arrived at the above conclusions, it
follows that the Court of First Instance of
Manila has jurisdiction to continue to final
judgment the proceedings in civil case No. 3012,
which involves civil rights of the parties under
the laws of the Commonwealth Government,
pending in said court at the time of the
restoration of the said Government; and that
the respondent judge of the court, having
refused to act and continue him does a duty
resulting from his office as presiding judge of
that court, mandamus is the speedy and
adequate remedy in the ordinary course of law,
especially taking into consideration the fact that
the question of jurisdiction herein involved does
affect not only this particular case, but many
other cases now pending in all the courts of
these Islands.
In view of all the foregoing it is adjudged and
decreed that a writ of mandamus issue,
directed to the respondent judge of the Court
of First Instance of Manila, ordering him to take
cognizance of and continue to final judgment
the proceedings in civil case No. 3012 of said
court. No pronouncement as to costs. So
ordered.
Moran, C.J., Ozaeta, Paras, Jaranilla and Pablo,
JJ., concur.
The principal question involved in this case is the validity of the proceedings held in civil case No. 3012,
in the Court of First Instance of the City of Manila, under the now defunct Philippine Republic, during
Japanese occupation; and the effect on said proceedings of the proclamation of General Douglas
MacArthur, dated October 23, 1944. The decision of this question requires the application of principles
of International Law, in connection with the municipal law in force in this country, before and during
Japanese occupation.

Questions of International Law must be decided as matters of general law (Juntington vs. Attril, 146 U.S.,
657; 13 Sup. Ct. 224; 36 Law. ed., 1123); and International Law is no alien in this Tribunal, as, under the
Constitution of the Commonwealth of the Philippines, it is a part of the fundamental law of the land
(Article II, section 3).

As International Law is an integral part of our laws, it must be ascertained and administered by this
Court, whenever questions of right depending upon it are presented for our determination, sitting as an
international as well as a domestic Tribunal (Kansas vs. Colorado, 185 U.S., 146; 22 Sup. Ct. 552; 46 Law.
Ed., 838).

Since International Law is a body of rules actually accepted by nations as regulating their mutual
relations, the proof of the existence of a given rule is to be found in the consent of nations to abide by
that rule; and this consent is evidenced chiefly by the usages and customs of nations, and to ascertain
what these usages and customs are, the universal practice is to turn to the writings of publicists and to
the decisions of the highest courts of the different countries of the world (The Habana, 175 U.S., 677; 20
Sup. Cit., 290; 44 Law. ed., 320).

But while usage is the older and original source of International Law, great international treaties are a
later source of increasing importance, such as The Hague Conventions of 1899 and 1907.

The Hague Conventions of 1899, respecting laws and customs of war on land, expressly declares that:

ARTICLE XLII. Territory is considered occupied when it is actually placed under the authority of
the hostile army.

The occupation applies only to be territory where such authority is established, and in a position
to assert itself.

ARTICLE XLIII. The authority of the legitimate power having actually passed into the hands of the
occupant, the later shall take all steps in his power to reestablish and insure, as far as possible,
public order and safety, while respecting, unless absolutely prevented, the laws in force in the
country. (32 Stat. II, 1821.)

The above provisions of the Hague Convention have been adopted by the nations giving adherence to
them, among which is United States of America (32 Stat. II, 1821).

The commander in chief of the invading forces or military occupant may exercise governmental
authority, but only when in actual possession of the enemy's territory, and this authority will be
exercised upon principles of international Law (New Orleans vs. Steamship Co, [1874], 20 Wall., 387;
Kelly vs. Sanders [1878], 99 U.S., 441; MacLeod vs. U.S., 229 U.S. 416; 33 Sup. Ct., 955; 57 Law Ed., 1260;
II Oppenheim of International Law, section 167).

There can be no question that the Philippines was under Japanese military occupation, from January,
1942, up to the time of the reconquest by the armed forces of the United States of the Island of Luzon,
in February, 1945.
It will thus be readily seen that the civil laws of the invaded State continue in force, in so far as they do
not affect the hostile occupant unfavorably. The regular judicial Tribunals of the occupied territory
continue usual for the invader to take the whole administration into his own hands, partly because it is
easier to preserve order through the agency of the native officials, and partly because it is easier to
preserve order through the agency of the native officials, and partly because the latter are more
competent to administer the laws in force within the territory and the military occupant generally keeps
in their posts such of the judicial and administrative officers as are willing to serve under him, subjecting
them only to supervision by the military authorities, or by superior civil authorities appointed by
him.(Young vs. U.S., 39; 24 Law, ed., 992; Coleman vs. Tennessee, 97 U.S., 509; 24 Law ed., 1118;
MacLeod vs. U.S., 229 U.S., 416; 33 Sup. Ct., 955; 57 Law. ed., 1260; Taylor on International Law,
sections 576. 578; Wilson on International Law; pp. 331-37; Hall on International Law, 6th Edition
[1909], pp. 464, 465, 475, 476; Lawrence on International Law, 7th ed., pp. 412, 413; Davis, Elements of
International Law, 3rd ed., pp. 330-332 335; Holland on International Law pp. 356, 357, 359; Westlake
on International Law, 2d ed., pp. 121-23.)

It is, therefore, evident that the establishment of the government under the so-called Philippine
Republic, during Japanese occupation, respecting the laws in force in the country, and permitting the
local courts to function and administer such laws, as proclaimed in the City of Manila, by the
Commander in Chief of the Japanese Imperial Forces, on January 3, 1942, was in accordance with the
rules and principles of International Law.

If the military occupant is thus in duly bound to establish in the territory under military occupation
governmental agencies for the preservation of peace and order and for the proper administration of
justice, in accordance with the laws in force within territory it must necessarily follow that the judicial
proceedings conducted before the courts established by the military occupant must be considered legal
and valid, even after said government establish by the military occupant has been displaced by the
legitimate government of the territory.

Thus the judgments rendered by the Confederate Courts, during the American Civil War, merely settling
the rights of private parties actually within their jurisdiction, not tending to defeat the legal rights of
citizens of the United States, nor in furtherance of laws passed in aid of the rebellion had been declared
valid and binding (Cock vs.Oliver, 1 Woods, 437; Fed. Cas., No. 3, 164; Coleman vs. Tennessee, 97 U. S.,
509; 24 Law. ed., 118; Williamsvs. Bruffy, 96 U. S., 176; Horn vs. Lockhart, 17 Wall., 570;
Sprott vs. United States, 20 id., 459; Texas vs. White, 7id., 700; Ketchum vs. Buckley [1878], 99 U.S.,
188); and the judgment of a court of Georgia rendered in November, 1861, for the purchase money of
slaves was held valid judgment when entered, and enforceable in 1871(French vs. Tumlin, 10 Am. Law.
Reg. [N.S.], 641; Fed. Case, No. 5104).

Said judgments rendered by the courts of the states constituting the Confederate States of America
were considered legal and valid and enforceable, even after the termination of the American Civil War,
because they had been rendered by the courts of a de facto government. The Confederate States were
a de facto government in the sense that its citizens were bound to render the government obedience in
civil matters, and did not become responsible, as wrong-doers, for such acts of obedience
(Thorington vs. Smith, 8 Wall. [U.S.], 9; 19 Law. ed., 361).

In the case of Ketchum vs. Buckley ([1878], 99 U.S., 188), the Court held — "It is now settled law in this
court that during the late civil war the same general form of government, the same general law for the
administration of justice and the protection of private rights, which had existed in the States prior to the
rebellion, remained during its continuance and afterwards. As far as the acts of the States did not impair
or tend to impair the supremacy of the national authority, or the just and legal rights of the citizens,
under the Constitution, they are in general to be treated as valid and binding." (William vs. Bruffy, 96
U.S., 176; Horn vs. Lockhart, 17 Wall., 570; Sprott vs. United States, 20 id., 459; Texas vs. White, 7 id.,
700.)
The government established in the Philippines, during Japanese occupation, would seem to fall under
the following definition of de facto government given by the Supreme Court of the United States:

But there is another description of government, called also by publicists, a government de facto,
but which might, perhaps, be more aptly denominateda government of paramount force. Its
distinguishing characteristics are (1) that its existence is maintained by active military power
within the territories, and against the rightful authority of an established and lawful
government; and (2) that while it exists it must necessarily be obeyed in civil matters by private
citizens who, by acts of obedience rendered in submission to such force, do not become
responsible, as wrong doers, for those acts, though not warranted by the laws of the rightful
government. Actual government of this sort are established over districts differing greatly in
extent and conditions. They are usually administered directly by military authority, but they may
be administered, also, by civil authority, supported more or less directly by military force.
(Macleod vs. United States [1913] 229 U.S., 416.)

The government established in the Philippines, under the so-called Philippine Republic, during Japanese
occupation, was and should be considered as a de facto government; and that the judicial proceedings
conducted before the courts which had been established in this country, during said Japanese
occupation, are to be considered legal and valid and enforceable, even after the liberation of this
country by the American forces, as long as the said judicial proceedings had been conducted, under the
laws of the Commonwealth of the Philippines.

The judicial proceedings involved in the case under consideration merely refer to the settlement of
property rights, under the provisions of the Civil Code, in force in this country under the Commonwealth
government, before and during Japanese occupation.

Now, petitioner contends that the judicial proceedings in question are null and void, under the
provisions of the proclamation issued by General Douglas MacArthur, dated October 23, 1944; as said
proclamation "nullifies all the laws, regulations and processes of any other government of the
Philippines than that of the Commonwealth of the Philippines."

In other words, petitioner demands a literal interpretation of said proclamation issued by General
Douglas MacArthur, a contention which, in our opinion, is untenable, as it would inevitably produce
judicial chaos and uncertainties.

When an act is susceptible of two or more constructions, one of which will maintain and the others
destroy it, the courts will always adopt the former (U. S. vs. Coombs [1838], 12 Pet., 72; 9 Law. ed.,
1004; Board of Supervisors of Granada County vs. Brown [1884], 112 U.S., 261; 28 Law. ed., 704; 5 Sup.
Ct. Rep., 125; In re Guarina [1913], 24 Phil., 37; Fuentes vs. Director of Prisons [1924], 46 Phil., 385). The
judiciary, always alive to the dictates of national welfare, can properly incline the scales of its decisions
in favor of that solution which will most effectively promote the public policy (Smith, Bell & Co.,
Ltd. vs. Natividad [1919], 40 Phil., 136). All laws should receive a sensible construction. General terms
should be so limited in their application as not lead to injustice, oppression or an absurd consequence. It
will always, therefore, be presumed that the legislature intended exceptions to its language, which
would avoid results of this character. The reason of the law in such cases should prevail over its letter
(U. S. vs. Kirby, 7 Wall. [U.S.], 482; 19 Law. ed., 278; Church of Holy Trinity vs. U. S., 143 U. S. 461; 12
Sup. Ct., 511; 36 Law. ed., 226; Jacobson vs. Massachussetts, 197 U. S., 39; 25 Sup. Ct., 358; 49 Law. ed.,
643; 3 Ann. Cas., 765; In re Allen, 2 Phil., 630). The duty of the court in construing a statute, which is
reasonably susceptible of two constructions to adopt that which saves is constitutionality, includes the
duty of avoiding a construction which raises grave and doubtful constitutional questions, if it can be
avoided (U. S. vs. Delaware & Hudson Co., U.S., 366; 29 Sup. Ct., 527; 53 Law. ed., 836).

According to the rules and principles of International Law, and the legal doctrines cited above, the
judicial proceedings conducted before the courts of justice, established here during Japanese military
occupation, merely applying the municipal law of the territory, such as the provisions of our Civil Code,
which have no political or military significance, should be considered legal, valid and binding.

It is to be presumed that General Douglas MacArthur is familiar with said rules and principles, as
International Law is an integral part of the fundamental law of the land, in accordance with the
provisions of the Constitution of the United States. And it is also to be presumed that General
MacArthur his acted, in accordance with said rules and principles of International Law, which have been
sanctioned by the Supreme Court of the United States, as the nullification of all judicial proceedings
conducted before our courts, during Japanese occupation would lead to injustice and absurd results,
and would be highly detrimental to the public interests.

For the foregoing reasons, I concur in the majority opinion.

PERFECTO, J., dissenting:

Law must be obeyed. To keep the bonds of society, it must not be evaded. On its supremacy depends
the stability of states and nations. No government can prevail without it. The preservation of the human
race itself hinges in law.

Since time immemorial, man has relied on law as an essential means of attaining his purposes, his
objectives, his mission in life. More than twenty-two centuries before the Christian Era, on orders of the
Assyrian King Hammurabi, the first code was engrave in black diorite with cunie form characters. Nine
centuries later Emperor Hung Wu, in the cradle of the most ancient civilization, compiled the Code of
the Great Ming. The laws of Manu were written in the verdic India. Moses received at Sinai the ten
commandments. Draco, Lycurgus, Solon made laws in Greece. Even ruthless Genghis Khan used laws to
keep discipline among the nomad hordes with which he conquered the greater part of the European and
Asiastic continents.

Animal and plants species must follow the mendelian heredity rules and other biological laws to survive.
Thanks to them, the chalk cliffs of the infusoria show the marvel of an animal so tiny as to be
imperceptible to the naked eye creating a whole mountain. Even the inorganic world has to conform the
law. Planets and stars follow the laws discovered by Kepler, known as the law-maker of heavens. If,
endowed with rebellious spirit, they should happen to challenge the law of universal gravity, the
immediate result would be cosmic chaos. The tiny and twinkling points of light set above us on the
velvet darkness of the night will cease to inspire us with dreams of more beautiful and happier worlds.

Again we are called upon to do our duty. Here is a law that we must apply. Shall we shrink? Shall we
circumvent it ? Can we ignore it?

The laws enacted by the legislators shall be useless if courts are not ready to apply them. It is actual
application to real issues which gives laws the breath of life.

In the varied and confused market of human endeavor there are so many things that might induce us to
forget the elementals. There are so many events, so many problem, so many preoccupations that are
pushing among themselves to attract our attention, and we might miss the nearest and most familiar
things, like the man who went around his house to look for a pencil perched on one of his ears.

THE OCTOBER PROCLAMATION

In October, 1944, the American Armed Forces of Liberation landed successfully in Leyte.
When victory in islands was accomplished, after the most amazing and spectacular war operations,
General of the Army Douglas MacArthur as a commander in Chief of the American Army, decided to
reestablish, in behalf of the United States, the Commonwealth Government.

Then he was confronted with the question as to what policy to adopt in regards to the official acts of the
governments established in the Philippines by the Japanese regime. He might have thought of
recognizing the validity of some of said acts, but, certainly, there were acts which he should declare null
and void, whether against the policies of the American Government, whether inconsistent with military
strategy and operations, whether detrimental to the interests of the American or Filipino peoples,
whether for any other strong or valid reasons.

But, which to recognize, and which not? He was not in a position to gather enough information for a
safe basis to distinguished and classify which acts must be nullified, and which must validated. At the
same time he had to take immediate action. More pressing military matters were requiring his
immediate attention. He followed the safe course: to nullify all the legislative, executive, and judicial
acts and processes under the Japanese regime. After all, when the Commonwealth Government is
already functioning, with proper information, he will be in a position to declare by law, through its
Congress, which acts and processes must be revived and validated in the public interest.

So on October 23, 1944, the Commander in Chief issued the following proclamation:

GENERAL HEADQUARTERS

SOUTHWEST PACIFIC AREA

OFFICE OF THE COMMANDER IN CHIEF

PROCLAMATION

To the People of the Philippines:

WHEREAS, the military forces under my command have landed in the Philippines soil as a
prelude to the liberation of the entire territory of the Philippines; and

WHEREAS, the seat of the Government of the Commonwealth of the Philippines has been re-
established in the Philippines under President Sergio Osmeña and the members of his cabinet;
and

WHEREAS, under enemy duress, a so-called government styled as the "Republic of the
Philippines" was established on October 14, 1943, based upon neither the free expression of the
people's will nor the sanction of the Government of the United States, and is purporting to
exercise Executive, Judicial and Legislative powers of government over the people;

Now, therefore, I, Douglas MacArthur, General, United States Army, as Commander in Chief of
the military forces committed to the liberation of the Philippines, do hereby proclaim and
declare:

1. That the Government of the Commonwealth of the Philippines is, subject to the
supreme authority of the Government of the United States, the sole and the only
government having legal and valid jurisdiction over the people in areas of the
Philippines free of enemy occupation and control;

2. The laws now existing on the statute books of the Commonwealth of the Philippines
and the regulation promulgated pursuant thereto are in full force and effect and legally
 binding upon the people in areas of the Philippines free of enemy occupation and
control; and

3. That all laws, regulations and processes of any other government in the Philippines
than that of the said Commonwealth are null and void and without legal effect in areas
of the Philippines free enemy occupation and control; and

I do hereby announce my purpose progressively to restore and extend to the people of the
Philippines the sacred right of government by constitutional process under the regularly
constituted Commonwealth Government as rapidly as the several occupied areas are liberated
to the military situation will otherwise permit;

I do enjoin upon all loyal citizens of the Philippines full respect for and obedience to the
Constitution of the Commonwealth of the Philippines and the laws, regulations and other acts of
their duly constituted government whose seat is now firmly re-established on Philippine soil.

October 23, 1944.

DOUGLAS MACARTHUR
General U. S. Army
Commander in Chief

IS THE OCTOBER PROCLAMATION LAW?

In times of war the Commander in Chief of an army is vested with extraordinary inherent powers, as a
natural result of the nature of the military operations aimed to achieve the purposes of his country in
the war, victory being paramount among them.

Said Commander in Chief may establish in the occupied or reoccupied territory, under his control, a
complete system of government; he may appoint officers and employees to manage the affairs of said
government; he may issue proclamations, instructions, orders, all with the full force of laws enacted by a
duly constituted legislature; he may set policies that should be followed by the public administration
organized by him; he may abolish the said agencies. In fact, he is the supreme ruler and law-maker of
the territory under his control, with powers limited only by the receipts of the fundamental laws of his
country.

California, or the port of San Francisco, had been conquered by the arms of the United States as
early as 1846. Shortly afterward the United States had military possession of all upper California.
Early in 1847 the President, as constitutional commander in chief of the army and navy,
authorized the military and naval commander of our forces in California to exercise the
belligerent rights of a conqueror, and form a civil government for the conquered country, and to
impose duties on imports and tonnage as military contributions for the support of the
government, and of the army which has the conquest in possession. . . Cross of Harrison, 16
Howard, 164, 189.)

In May, 1862, after the capture of New Orleans by the United States Army, General Butler, then
in command of the army at that place, issued a general order appointing Major J. M. Bell,
volunteer aide-de-camp, of the division staff, provost judge of the city, and directed that he
should be obeyed and respected accordingly. The same order appointed Capt. J. H. French
provost marshal of the city, the Capt. Stafford deputy provost marshal. A few days after this
order the Union Bank lent to the plaintiffs the sum of $130,000, and subsequently, the loan not
having been repaid, brought suit before the provost judge to recover the debt. The defense was
taken that the judge had no jurisdiction over the civil cases, but judgement was given against
the borrowers, and they paid the money under protest. To recover it back is the object of the
present suit, and the contention of the plaintiffs is that the judgement was illegal and void,
because the Provost Court had no jurisdiction of the case. The judgement of the District Court
was against the plaintiffs, and this judgement was affirmed by the Supreme Court of the State.
To this affirmance error is now assigned.

The argument of the plaintiffs in error is that the establishment of the Provost Court, the
appointment of the judge, and his action as such in the case brought by the Union Bank against
them were invalid, because in violation of the Constitution of the United States, which vests the
judicial power of the General government in one Supreme Court and in such inferior courts as
Congress may from time to time ordain and establish, and under this constitutional provision
they were entitled to immunity from liability imposed by the judgment of the Provost Court.
Thus, it is claimed, a Federal question is presented, and the highest court of the State having
decided against the immunity claimed, our jurisdiction is invoked.

Assuming that the case is thus brought within our right to review it, the controlling question is
whether the commanding general of the army which captured New Orleans and held it in May
1862, had authority after the capture of the city to establish a court and appoint a judge with
power to try and adjudicate civil causes. Did the Constitution of the United States prevent the
creation of the civil courts in captured districts during the war of the rebellion, and their
creation by military authority?

This cannot be said to be an open question. The subject came under the consideration by this
court in The Grapeshot, where it was decided that when, during the late civil war, portions of
the insurgent territory were occupied by the National forces, it was within the constitutional
authority of the President, as commander in chief, to establish therein provisional courts for the
hearing and determination of all causes arising under the laws of the States or of the United
States, and it was ruled that a court instituted by President Lincoln for the State of Louisiana,
with authority to hear, try, and determine civil causes, was lawfully authorized to exercise such
jurisdiction. Its establishment by the military authority was held to be no violation of the
constitutional provision that "the judicial power of the United States shall be vested in one
Supreme Court and in such inferior courts as the Congress may form time to time ordain and
establish." That clause of the Constitution has no application to the abnormal condition of
conquered territory in the occupancy of the conquering, army. It refers only to courts of United
States, which military courts are not. As was said in the opinion of the court, delivered by Chief
Justice Chase, in The Grapeshot, "It became the duty of the National government, wherever the
insurgent power was overthrown, and the territory which had been dominated by it was
occupied by the National forces, to provide, as far as possible, so long as the war continued, for
the security of the persons and property and for the administration of justice. The duty of the
National government in this respect was no other than that which devolves upon a regular
belligerent, occupying during war the territory of another belligerent. It was a military duty, to
be performed by the President, as Commander in Chief, and instructed as such with the
direction of the military force by which the occupation was held."

Thus it has been determined that the power to establish by military authority courts for the
administration of civil as well as criminal justice in portions of the insurgent States occupied by
the National forces, is precisely the same as that which exists when foreign territory has been
conquered and is occupied by the conquerors. What that power is has several times been
considered. In Leitensdorfer & Houghton vs. Webb, may be found a notable illustration. Upon
the conquest of New Mexico, in 1846, the commanding officer of the conquering army, in virtue
of the power of conquest and occupancy, and with the sanction and authority of the President,
ordained a provisional government for the country. The ordinance created courts, with both civil
and criminal jurisdiction. It did not undertake to change the municipal laws of the territory, but
it established a judicial system with a superior or appellate court, and with circuit courts, the
jurisdiction of which declared to embrace, first, all criminal causes that should not otherwise
provided for by law; and secondly, original and exclusive cognizance of all civil cases not
 cognizable before the prefects and alcades. But though these courts and this judicial system
were established by the military authority of the United States, without any legislation of
Congress, this court ruled that they were lawfully established. And there was no express order
for their establishment emanating from the President or the Commander in Chief. The
ordinance was the act of the General Kearney the commanding officer of the army occupying
the conquered territory.

In view of these decisions it is not to be questioned that the Constitution did not prohibit the
creation by the military authority of court for the trial of civil causes during the civil war in
conquered portions of the insurgent States. The establishment of such courts is but the exercise
of the ordinary rights of conquest. The plaintiffs in error, therefore, had no constitutional
immunity against subjection to the judgements of such courts. They argue, however, that if this
be conceded, still General Butler had no authority to establish such a court; that the President
alone, as a Commander in Chief, had such authority. We do not concur in this view. General
Butler was in command of the conquering and the occupying army. He was commissioned to
carry on the war in Louisina. He was, therefore, invested with all the powers of making war, so
far as they were denied to him by the Commander in Chief, and among these powers, as we
have seen, was of establishing courts in conquered territory. It must be presumed that he acted
under the orders of his superior officer, the President, and that his acts, in the prosecution of
the war, were the acts of his commander in chief. (Mechanics' etc. Bank vs. Union Bank, 89 U. S.
[22 Wall.], 276-298.)

There is no question, therefore, that when General of the Army Douglas MacArthur issued on October
Proclamation, he did it in the legitimate exercise of his powers. He did it as the official representative of
the supreme authority of the United States of America. Consequently, said proclamation is legal, valid,
and binding.

Said proclamation has the full force of a law. In fact, of a paramount law. Having been issued in the
exercise of the American sovereignty, in case of conflict, it can even supersede, not only the ordinary
laws of the Commonwealth of the Philippines, but also our Constitution itself while we remain under the
American flag.

"PROCESS" IN THE OCTOBER PROCLAMATION

In the third section of the dispositive part of the October Proclamation, it is declared that all laws,
regulations and processes of any other government in the Philippines than that of the Commonwealth,
are null and void.

Does the word "processes" used in the proclamation include judicial processes?

In its broadest sense, process is synonymous with proceedings or procedures and embraces all the steps
and proceedings in a judicial cause from it commencement to its conclusion.

PROCESS. In Practice. — The means of compelling a defendant to appear in court after suing out
the original writ, in civil, and after indictment, in criminal cases.

The method taken by law to compel a compliance with the original writ or command as of the
court.

A writ, warrant, subpoena, or other formal writing issued by authority law; also the means of
accomplishing an end, including judicial proceedings; Gollobitch vs. Rainbow, 84 la., 567; 51 N.
W., 48; the means or method pointed out by a statute, or used to acquire jurisdiction of the
defendants, whether by writ or notice. Wilson vs. R. Co. (108 Mo., 588; 18 S. W., 286; 32 Am. St.
Rep., 624). (3 Bouvier's Law Dictionary, p. 2731.)
A. Process generally. 1. Definition. — As a legal term process is a generic word of every
comprehensive signification and many meanings. It is broadest sense it is equivalent to, or
synonymous with, "proceedings" or "procedure," and embraces all the steps and proceedings in
a cause from its commencement to its conclusion. Sometimes the term is also broadly defined
as the means whereby a court compels a compliance with it demands. "Process" and "writ" or
"writs" are synonymous in the sense that every writ is a process, and in a narrow sense of the
term "process" is limited to judicial writs in an action, or at least to writs or writings issued from
or out of court, under the seal thereof, and returnable thereto; but it is not always necessary to
construe the term so strictly as to limit it to a writ issued by a court in the exercise of its ordinary
jurisdiction; the term is sometimes defined as a writ or other formal writing issued by authority
of law or by some court, body, or official having authority to issue it; and it is frequently used to
designate a means, by writ or otherwise , of acquiring jurisdiction of defendant or his property,
or of bringing defendant into, or compelling him to appear in, court to answer.

As employed in the statutes the legal meaning of the word "process" varies according to the
context, subject matter, and spirit of the statute in which it occurs. In some jurisdictions codes
or statutes variously define "process" as signifying or including: A writ or summons issued in the
course of judicial proceedings; all writs, warrants, summonses, and orders of courts of justice or
judicial officers; or any writ, declaration, summons, order, or subpoena whereby any action, suit
or proceeding shall be commenced, or which shall be issued in or upon any action, suit or
proceeding. (50 C. J., PP. 441, 442.)

The definition of "process" given by Lord Coke comprehends any lawful warrant, authority, or
proceeding by which a man may be arrested. He says: "Process of law is two fold, namely, by the
King's writ, or by proceeding and warrant, either in deed or in law, without writ."
(People vs. Nevins [N. Y.] Hill, 154, 169, 170; State vs. Shaw, 50 A., 869; 73 Vt., 149.)

Baron Comyn says that process, in a large acceptance, comprehends the whole proceedings
after the original and before judgement; but generally it imports the writs which issue out of any
court to bring the party to answer, or for doing execution, and all process out of the King's court
ought to be in the name of the King. It is called "process" because it proceeds or goes upon
former matter, either original or judicial. Gilmer, vs. Bird 15 Fla., 410, 421. (34 Words and
Phrases, permanent edition, 1940 edition, p. 147.)

In a broad sense the word "process" includes the means whereby a court compels the
appearance of the defendant before it, or a compliance with it demands, and any every writ,
rule order, notice, or decree, including any process of execution that may issue in or upon any
action, suit, or legal proceedings, and it is not restricted to mesne process. In a narrow or
restricted sense it is means those mandates of the court intending to bring parties into court or
to require them to answer proceedings there pending. (Colquitt Nat. Bank vs. Poitivint, 83 S. E.,
198, 199; 15 Ga. App., 329. (34 Words and Phrases, permanent edition, 1940 edition, p. 148.)

A "process" is an instrument in an epistolary from running in the name of the sovereign of a

state and issued out of a court of justice, or by a judge thereof, at the commencement of an
action or at any time during its progress or incident thereto, usually under seal of the court, duly
attested and directed to some municipal officer or to the party to be bound by it, commanding
the commission of some act at or within a specified time, or prohibiting the doing of some act.
The cardinal requisites are that the instrument issue from a court of justice, or a judge thereof;
that it run in the name of the sovereign of the state; that it be duly attested, but not necessarily
by the judge, though usually, but not always, under seal; and that it be directed to some one
commanding or prohibiting the commission of an act. Watson vs. Keystone Ironworks Co., 74 P.,
272, 273; 70 Kan., 43. (34 Words and Phrases, permanent edition, 1940 edition, p. 148.)

Jacobs in his Law Dictionary says: "Process" has two qualifications: First, it is largely taken for all
proceedings in any action or prosecution, real or personal, civil or criminal, from the beginning
 to the end; secondly, that is termed the "process" by which a man is called into any temporal
court, because the beginning or principal part thereof, by which the rest is directed or taken.
Strictly, it is a proceeding after the original, before the judgement. A policy of fire insurance
contained the condition that if the property shall be sold or transferred, or any change takes
place in title or possession, whether by legal process or judicial decree or voluntary transfer or
convenience, then and in every such case the policy shall be void. The term "legal process," as
used in the policy, means what is known as a writ; and, as attachment or execution on the writs
are usually employed to effect a change of title to property, they are or are amongst the
processes contemplated by the policy. The words "legal process" mean all the proceedings in an
action or proceeding. They would necessarily embrace the decree, which ordinarily includes the
proceedings. Perry vs. Lorillard Fire Ins. Co., N. Y., 6 Lans., 201, 204. See, also,
Tipton vs. Cordova, 1 N. M., 383, 385. (34 Words and Phrases, permanent edition, 1940 edition,
p. 148.)

"Process" in a large acceptation, is nearly synonymous with "proceedings," and means the entire
proceedings in an action, from the beginning to the end. In a stricter sense, it is applied to the
several judicial writs issued in an action. Hanna vs. Russell, 12 Minn., 80, 86 (Gil., 43, 45). (34
Words and Phrases, permanent edition, 1940, edition 149.)

The term "process" as commonly applied, intends that proceeding by which a party is called into
court, but it has more enlarged signification, and covers all the proceedings in a court, from the
beginning to the end of the suit; and, in this view, all proceedings which may be had to bring
testimony into court, whether viva voce or in writing, may be considered the process of the
court. Rich vs. Trimple, Vt., 2 Tyler, 349, 350. Id.

"Process" in its broadest sense comprehends all proceedings to the accomplishment of an end,
including judicial proceedings. Frequently its signification is limited to the means of bringing a
party in court. In the Constitution process which at the common law would have run in the
name of the king is intended. In the Code process issued from a court is meant.
McKenna vs. Cooper, 101 P., 662, 663; 79 Kan., 847, quoting Hanna vs. Russel, 12 Minn., 80.
(Gil., 43 ); Black Com. 279; Bou vs. Law. Dict. (34 Words and Phrases, permanent edition 1940
edition, p. 149.)

"Judicial process" includes the mandate of a court to its officers, and a means whereby courts
compel the appearance of parties, or compliance with its commands, and includes a
summons. Ex parte Hill, 51 So., 786, 787; 165 Ala., 365.

"Judicial process" comprehends all the acts of then court from the beginning of the proceeding
to its end, and in a narrower sense is the means of compelling a defendant to appear in court
after suing out the original writ in civil case and after the indictment in criminal cases, and in
every sense is the act of the court and includes any means of acquiring jurisdiction and includes
attachment, garnishment, or execution, and also a writ. Blair vs. Maxbass Security Bank of
Maxbass, 176 N. W., 98, 199; 44 N. D. 12 (23 Words and Phrases, permanent edition 1940
edition, p. 328.)

There is no question that the word process, as used in the October Proclamation, includes all judicial
processes or proceedings.

The intention of the author of the proclamation of including judicial processes appears clearly in the
preamble of the document.

The second "Whereas," states that so-called government styled as the "Republic of the Philippines,"
based upon neither the free expression of the people's will nor the sanction of the Government of the
United States, and is purporting to the exercise Executive, Judicial, and Legislative powers of
government over the people."

It is evident from the above-mentioned words that it was the purpose of General MacArthur to declare
null and void all acts of government under the Japanese regime, and he used, in section 3 of he
dispositive part, the word laws, as pertaining to the legislative branch, the word regulations, as
pertaining to the executive branch, and lastly, the word processes, as pertaining to the judicial branch of
the government which functioned under the Japanese regime.

It is reasonable to assume that he might include in the word "process." besides those judicial character,
those of executive or administrative character. At any rate, judicial processes cannot be excluded.

THE WORDS OF PROCLAMATION EXPRESS UNMISTAKABLY

THE INTENTION OF THE AUTHOR

The October Proclamation is written in such a way that it is impossible to make a mistake as to the
intention of its author.

Oliver Wendell Holmes, perhaps the wisest man who had ever sat in the Supreme Court of the United
States, the following:

When the words in their literal sense have a plain meaning, courts must be very cautious in
allowing their imagination to give them a different one. Guild vs. Walter, 182 Mass., 225, 226
(1902)

Upon questions of construction when arbitrary rule is involved, it is always more important to
consider the words and the circumstances than even strong analogies decisions. The successive
neglect of a series of small distinctions, in the effort to follow precedent, is very liable to end in
perverting instruments from their plain meaning. In no other branch of the law (trusts) is so
much discretion required in dealing with authority. . . . There is a strong presumption in favor of
giving them words their natural meaning, and against reading them as if they said something
else, which they are not fitted to express. (Merrill vs. Preston, 135 Mass., 451, 455 (1883).

When the words of an instrument are free from ambiguity and doubt, and express plainly, clearly and
distinctly the sense of the framer, there is no occasion to resort to other means of interpretation. It is
not allowable to interpret what needs no interpretation.

Very strong expression have been used by the courts to emphasize the principle that they are to derive
their knowledge of the legislative intention from the words or language of the statute itself which the
legislature has used to express it. The language of a statute is its most natural guide. We are not liberty
to imagine an intent and bind the letter to the intent.

The Supreme Court of the United States said: "The primary and general rule of statutory construction is
that the intent of the law-maker is to be found in the language that he has used. He is presumed to
know the meaning of the words and the rules of grammar. The courts have no function of legislation,
and simply seek to ascertain the will of the legislator. It is true that there are cases in which the letter of
the statute is not deemed controlling, but the cases are few and exceptional and only arise where there
are cogent reasons for believing that the letter does not fully and accurately disclose the intent. No
mere ommission, no mere failure to provide for contingencies, which it may seem wise should have
specifically provided for will justify any judicial addition to the language of the statute." (United
States vs. Goldenberg, 168 U. S., 95, 102, 103; 18 S. C. Rep., 3; 42 Law. ed., 394.)
That the Government of the Commonwealth of the Philippines shall be the sole and only government in
our country; that our laws are in full force and effect and legally binding; that "all laws, regulations and
processes of any other government are null and void and without legal effect", are provisions clearly,
distinctly, unmistakably expressed in the October Proclamation, as to which there is no possibility of
error, and there is absolutely no reason in trying to find different meanings of the plain words employed
in the document.

As we have already seen, the annulled processes are precisely judicial processes, procedures and
proceedings, including the one which is under our consideration.

THE OCTOBER PROCLAMATION ESTABLISHES A CLEAR POLICY

Although, as we have already stated, there is no possible mistakes as to the meaning of the words
employed in the October Proclamation, and the text of the document expresses, in clear-cut sentences,
the true purposes of its author, it might not be amiss to state here what was the policy intended to be
established by said proclamation.

It is a matter of judicial knowledge that in the global war just ended on September 2, 1945, by the
signatures on the document of unconditional surrender affixed by representatives of the Japanese
government, the belligerents on both sides resorted to what may call war weapons of psychological
character.

So Japan, since its military forces occupied Manila, had waged an intensive campaign propaganda,
intended to destroy the faith of the Filipino people in America, to wipe out all manifestations of
American or occidental civilization, to create interest in all things Japanese, which the imperial officers
tried to present as the acme of oriental culture, and to arouse racial prejudice among orientals and
occidentals, to induce the Filipinos to rally to the cause of Japan, which she tried to make us believe is
the cause of the inhabitants of all East Asia.

It is, then, natural that General MacArthur should take counter-measures to neutralize or annul
completely all vestiges of Japanese influence, specially those which might jeopardize in any way his
military operations and his means of achieving the main objective of the campaign of the liberation, that
is, to restore in our country constitutional processes and the high ideals constitute the very essence of
democracy.

It was necessary to free, not only our territory, but also our spiritual patrimony. It was necessary, not
only to restore to us the opportunity of enjoying the physical treasures which a beneficent Providence
accumulated on this bountiful land, the true paradise in the western Pacific, but to restore the full play
of our ideology, that wonderful admixture of sensible principles of human conduct, bequeathed to us by
our Malayan ancestors, the moral principles of the Christianity assimilated by our people from teachers
of Spain, and the common-sense rules of the American democratic way of life.

It was necessary to free that ideology from any Japanese impurity.

Undoubtedly, the author of the proclamation thought that the laws, regulations, and processes of all the
branches of the governments established under the Japanese regime, if allowed to continue and to have
effect, might be a means of keeping and spreading in our country the Japanese influence, with the same
deadly effects as the mines planted by the retreating enemy.

The government offices and agencies which functioned during the Japanese occupation represented a
sovereignty and ideology antagonistic to the sovereignty and ideology which MacArthur's forces sought
to restore in our country.
Under chapter I of the Japanese Constitution, it is declared that Japan shall reigned and governed by a
line Emperors unbroken for ages eternal (Article 1); that the Emperor is sacred and inviolable (Article 3);
that he is the head of the Empire, combining in himself the rights of the sovereignty (Article 4); that he
exercises the legislative power (Article 5); that he gives sanction to laws, and orders to be promulgated
and executed (Article 6);that he has the supreme command of the Army and Navy (Article 11); that he
declares war, makes peace, and concludes treaties (Article 13).

There is no reason for allowing to remain any vestige of Japanese ideology, the ideology of a people
which as confessed in a book we have at our desk, written by a Japanese, insists in doing many things
precisely in a way opposite to that followed by the rest of the world.

It is the ideology of a people which insists in adopting the policy of self-delusion; that believes that their
Emperor is a direct descendant of gods and he himself is a god, and that the typhoon which occured on
August 14, 1281, which destroyed the fleet with which Kublai Khan tried to invade Japan was the divine
wind of Ise; that defies the heinous crime of the ronin, the 47 assassins who, in order to avenge the
death of their master Asano Naganori, on February 3, 1703, entered stealthily into the house of
Yoshinaka Kiro and killed him treacherously.

It is an ideology which dignifies harakiri or sepukku, the most bloody and repugnant from suicide, and on
September 13, 1912, on the occasion of the funeral of Emperor Meiji, induced General Maresuke Nogi
and his wife to practice the abhorrent "junshi", and example of which is offered to us in the following
words of a historian:

When the Emperor's brother Yamato Hiko, died in 2 B. C., we are told that, following the
occasion, his attendants were assembled to from the hito-bashira (pillar-men) to gird the grave.
They were buried alive in circle up to the neck around the thomb and "for several days they died
not, but wept and wailed day night. At last they died not, but wept and wailed day night. At last
they did not rotted. Dogs and cows gathered and ate them." (Gowen, an Outline of History of
Japan, p. 50.)

The practice shows that the Japanese are the spiritual descendants of the Sumerians, the ferocious
inhabitants of Babylonia who, 3500 years B. C., appeared in history as the first human beings to honor
their patesis by killing and entombing with him his window, his ministers, and notable men and women
of his kingdom, selected by the priests to partake of such abominable honor. (Broduer, The Pageant of
Civilization, pp. 62-66.)

General MacArthur sought to annul completely the officials acts of the governments under the Japanese
occupation, because they were done at the shadow of the Japanese dictatorship, the same which
destroyed the independence of Korea, the "Empire of Morning Frehsness"; they violated the territorial
integrity of China, invaded Manchuria, and initiated therein the deceitful system of puppet
governments, by designating irresponsible Pu Yi as Emperor of Manchukuo; they violated the
trusteeship granted by the Treaty of Versailles by usurping tha mandated islands in the Pacific; they
initiated that they call China Incident, without war declaration, and, therefore, in complete disregard of
an elemental international duty; they attacked Pearl Harbor treacherously, and committed a long series
of the flagrant violations of international law that have logically bestowed on Japan the title of the
bandit nation in the social world.

The conduct of the Japanese during the occupation shows a shocking an anchronism of a modern world
power which seems to be re-incarnation of one whose primitive social types of pre-history, whose
proper place must be found in an archeological collection. It represents a backward jump in the
evolution of ethical and juridical concepts, a reversion that, more than a simple pathological state,
represents a characteristics and well defined case of sociological teratology.
Since they entered the threshold of our capital, the Japanese had announced that for every one of them
killed they would kill ten prominent Filipinos. They promised to respect our rights by submitting us to
the wholesale and indiscriminate slapping, tortures, and atrocious massacres. Driving nails in the
cranium, extraction of teeth and eyes, burnings of organs, hangings, diabolical zonings, looting of
properties, establishments of redlight districts, machine gunning of women and children, interment of
alive persons, they are just mere preludes of the promised paradised that they called "Greater East Asia
Co-Prosperity Sphere".

They promised religious liberty by compelling all protestant sects to unite, against the religious scruples
and convictions of their members, in one group, and by profaning convents, seminaries, churches, and
other cult centers of the Catholics, utilizing them as military barracks, munitions dumps, artillery base,
deposits of bombs and gasoline, torture chambers and zone, and by compelling the government officials
and employees to face and to bow in adoration before that caricature of divinity in the imperial palace
of Tokyo.

The Japanese offered themselves to be our cultural mentors by depriving us of the use of our schools
and colleges, by destroying our books and other means of culture, by falsifying the contents of school
texts, by eliminating free press, the radio, all elemental principles of civilized conduct, by establishing
classes of rudimentary Japanese so as to reduce the Filipinos to the mental level of the rude Japanese
guards, and by disseminating all kinds of historical, political, and cultural falsehoods.

Invoking our geographical propinquity and race affinity, they had the insolence of calling us their
brothers, without the prejuce of placing of us in the category of slaves, treating the most prominent
Filipinos in a much lower social and political category than that of the most ignorant and brutal subject
of the Emperor.

The civil liberties of the citizens were annulled. Witnesses and litigants were slapped and tortured during
investigations. In the prosecuting attorney's offices, no one was safe. When the Japanese arrested a
person, the lawyer who dared to intercede was also placed under arrest. Even courts were not free from
their dispotic members. There were judges who had to trample laws and shock their conscience in order
not to disgust a Nipponese.

The most noble of all professions, so much so that the universities of the world could not conceive of
higher honor that may be conferred than that of Doctor of Laws, became the most despised. It was
dangerous to practice the profession by which faith in the effectiveness of law is maintained; citizens
feel confident in the protection of their liberties, honor, and dignity; the weak may face the powerful;
the lowest citizen is not afraid of the highest official; civil equality becomes reality; justice is
admnistered with more efficiency; and democracy becomes the best system of government and the best
guaranty for the welfare and happiness of the individual human being. In fact, the profession of law was
annulled, and the best lawyers for the unfortunate prisoners in Fort Santiago and other centers of
torture were the military police, concubines, procurers, and spies, the providers of war materials and
shameful pleasures, and the accomplices in fraudulent transactions, which were the specialty of many
naval and military Japanese officers.

The courts and Filipino government officials were completely helpless in the question of protecting the
constitutional liberties and fundamental rights of the citizens who happen to be unfortunate enough to
fall under the dragnet of the hated kempei. Even the highest government officials were not safe from
arrest and imprisonment in the dreaded military dungeons, where torture or horrible death were always
awaiting the defenseless victim of the Japanese brutality.

May any one be surprised if General MacArthur decided to annul all the judicial processes?

The evident policy of the author of the October Proclamation can be seen if we take into consideration
the following provisions of the Japanese Constitution:
 ART. 57. The Judicature shall be exercised by the Courts of Law according to law, in the name of
the Emperor.

ART. 61. No suit at law, which relates to rights alleged to have been infringed by the illegal
measures of the executive authority .. shall be taken cognizance of by a Court of Law.

INTERNATIONAL LAW

Nobody dared challenge the validity of the October Proclamation.

Nobody dared challenge the authority of the military Commander in Chief who issued it.

Certainly not because of the awe aroused by the looming figure of General of the Army Douglas
MacArthur, the Allied Supreme Commander, the military hero, the greatest American general, the
Liberator of the Philippines, the conqueror of Japan, the gallant soldier under whose authority the
Emperor of the Japan, who is supposed to rule supreme for ages as a descendant of gods, is receiving
orders with the humility of a prisoner of war.

No challenge has been hurled against the proclamation or the authority of the author to issue it,
because everybody acknowledges the full legality of its issuance.

But because the proclamation will affect the interest and the rights of a group of individuals, and to
protect the same, a way is being sought to neutralize the effect of the proclamation.

The way found is to invoke international law. The big and resounding word is considered as a shibboleth
powerful enough to shield the affected persons from the annulling impact.

Even then, international law is not invoked to challenge the legality or authority of the proclamation, but
only to construe it in a convenient way so that judicial processes during the Japanese occupation,
through an exceptional effort of the imagination, might to segregated from the processes mentioned in
the proclamation.

An author said that the law of nations, the "jus gentiun", is not a fixed nor immutable science. On the
country, it is developing incessantly, it is perpetually changing in forms. In each turn it advances or
recedes, according to the vicissitudes of history, and following the monotonous rythm of the ebb and
rise of the tide of the sea.

Le driot des gens, en effet, n'est point une science fixe est immuable: bein au contraire, il se
developpe sans cesse, il change eternellement de formes; tour il avance et il recule, selon less
vicissitudes de histoire et suivan un rhythm monotone qui est comme le flux et le reflux d'un
mer. (M. Revon, De l'existence du driot international sous la republique romain.)

Another author has this to say:

International law, if it is or can be a science at all, or can be, at most a regulative science, dealing
with the conduct of States, that is, human beings in a certain capacity; and its principles and
prescriptions are not, like those of science proper, final and unchanging. The substance of
science proper is already made for man; the substance of international is actually made by man,
— and different ages make differently." (Coleman Philippson, The International Law and Custom
of Ancient Greece of Rome, Vol. I, p. 50.)

"Law must be stable, and yet it cannot stand still." (Pound, Interpretations of Legal History., p. 1. )
Justice Cardozo adds: "Here is the great antimony confronting us at every turn. Rest and motion,
unrelieved and unchecked, are equally destructive. The law, like human kind, if life is to continue, must
find some path compromise." (The Growth of Law p. 2.) Law is just one of the manifestations of human
life, and "Life has relations not capable of division into inflexible compartments. The moulds expand and
shrink," (Glanzer vs.Shepard, 233 N.Y., 236, 241.)

The characteristic plasticity of law is very noticeable, much more than in any other department, in
international law.

In a certain matters it is clear we have made substantial progress, but in other points, he (M.
Revon) maintains, we have retrograded; for example, in the middle ages the oath was not
always respected as faithfully as in ancient Rome; and nearer our own times, in the seventeenth
century, Grotius proclaims the unquestioned right of the belligerents to massacre the women
and the children of the enemy; and in our more modern age the due declaration of war which
Roman always conformed to has not been invariably observed. (Coleman Philippson, The
International Law and Custom of Ancient Greece and Rome, Vol. I, p. 209.)

Now let us see if any principle of international law may effect the enforcement of the October
Proclamation.

In this study we should be cautioned not to allow ourselves to be deluded by generalities and vagueness
which are likely to lead us easily to error, in view of the absence of codification and statutory provisions.

Our Constitution provides:

The Philippines renounces war as an instrument of national policy, and adopts the generally
accepted principles of international law as part of the law of the Nation. (Sec. 3, Art. II.)

There being no codified principles of international law, or enactments of its rules, we cannot rely on
merely legal precepts.

With the exception of international conventions and treaties and, just recently, the Charter of the
United Nations, adopted in San Francisco Conference on June 26, 1945, we have to rely on unsystemized
judicial pronouncements and reasonings and on theories, theses, and propositions that we may find in
the works of authors and publicists.

Due to that characteristic pliability and imprecision of international law, the drafters of our Constitution
had to content themselves with "generally accepted principles."

We must insists, therefore, that the principles should be specific and unmistakably defined and that
there is definite and conclusive evidence to the effect that they generally accepted among the civilized
nations of the world and that they belong to the current era and no other epochs of history.

The temptation of assuming the role of a legislator is greater in international law than in any other
department of law, since there are no parliaments, congresses, legislative assemblies which can enact
laws and specific statutes on the subject. It must be our concern to avoid falling in so a great
temptation, as its, dangers are incalculable. It would be like building castles in the thin air, or trying to
find an exit in the thick dark forest where we are irretrievably lost. We must also be very careful in our
logic. In so vast a field as international law, the fanciful wandering of the imagination often impair the
course of dialistics.

THE OCTOBER PROCLAMATION AND INTERNATIONAL LAW

Is there any principle of international law that may effect the October Proclamation?
We tried in vain to find out in the majority opinion anything as to the existence of any principle of
international law under which the authority of General MacArthur to issue the proclamation can
effectively be challenged.

No principle of international law has been, or could be invoked as a basis for denying the author of the
document legal authority to issue the same or any part thereof.

We awaited in vain for any one to dare deny General MacArthur the authority, under international law,
to declare null and void and without effect, not only the laws and regulations of the governments under
the Japanese regime, but all the processes of said governments, including judicial processes.

If General MacArthur, as commander in Chief of the American Armed Forces of Liberation, had
authority, full and legal, to issue the proclamation, the inescapable result will be the complete viodance
and nullity of all judicial processes, procedures, and proceedings of all courts under the Japanese
regime.

But those who are sponsoring the cause of said judicial processes try to achieve their aim, not by direct
means, but by following a tortuous side-road.

They accept and recognize the full authority of the author of the proclamation to issue it and all its
parts, but they maintain that General MacArthur did not and could not have in mind the idea of
nullifying the judicial processes during the Japanese occupation, because that will be in violation of the
principles of international law.

If we follow the reasoning of the majority opinion we will have to reach the conlusion that the world
"processes" does not appear at all in the October Proclamation.

It is stated more than once, and reiterated with dogmatic emphasis, that under the principles of
international law the judicial processes under an army occupation cannot be invalidated.

But we waited in vain for the specific principle of international law, only one of those alluded to, to be
pointed out to us.

If the law exist, it can be pointed out. If the principle exists, it can stated specifically. The word is being
used very often in plural, principles, but we need only one to be convinced.

The imagined principles are so shrouded in a thick maze of strained analogies and reasoning, that we
confess our inability even to have a fleeting glimpse at them through their thick and invulnerable
wrappers.

At every turn international law, the blatant words, are haunting us with the deafening bray of a trumpet,
but after the transient sound has fled away, absorbed by the resiliency of the vast atmosphere, the
announced principles, which are the very soul of international law, would disappear too with the lighting
speed of a vanishing dream.

WEAKNESS OF THE MAJORITY POSITION

In the majority opinion three questions are propounded: first, whether judicial acts and proceedings
during the Japanese occupation are valid even after liberation; second whether the October
Proclamation had invalidated all judgement and judicial proceedings under the Japanese regime; and
third, whether the present courts of the Commonwealth may continue the judicial proceedings pending
at the time of liberation.
As regards the first question, it is stated that it is a legal tourism in political and international law that all
acts of ade facto government are good and valid, that the governments established during the Japanese
occupation. that is, the Philippine Executive Commission and the Republic of the Philippines, were de
facto governments, and that it necessarily follows that the judicial acts and proceedings of the courts of
those governments, "which are not of a political complexion," were good and valid, and by virtue of the
principle of postliminium, remain good and valid after the liberation.

In the above reasoning we will see right away how the alleged legal truism in political and international
law, stated as a premise in a sweeping way, as an absolute rule, is immediately qualified by the
exception as to judicial acts and proceedings which are of a "political complexion."

So it is the majority itself which destroys the validity of what it maintains as a legal truism in political and
international law, by stating from the beginning of the absolute proposition that all acts and proceedings
of the legislative, executive, and judicial departments of a de facto governments are good and valid.

It is be noted that no authority, absolutely no authority, has been cited to support the absolute and
sweeping character of the majority proposition as stated in their opinion.

No authority could be cited, because the majority itself loses faith in the validity of such absolute and
sweeping proposition, by establishing an unexplained exception as regards the judicial acts and
proceedings of a "political complexion."

Besides, it is useless to try to find in the arguments of the majority anything that may challenge the
power, the authority of a de jure government to annul the official acts of a de facto government, or the
legal and indisputable authority of the restored legitimate government to refuse to recognize the official
acts, legislative, executive and judicial, of the usurping government, once the same is ousted.

As to the second question, the majority argues that the judicial proceedings and judgments of the de
factogovernments under the Japanese regime being good and valid, "it should be presumed that it was
not, and could not have been, the intention of General Douglas MacArthur to refer to judicial processes,
when he used the last word in the October Proclamation, and that it only refers to government
processes other than judicial processes or court proceedings."

The weakness and absolute ineffectiveness of the argument are self-evident.

It is maintained that when General MacArthur declared the processes of the governments under the
Japanese regime null and void, he could not refer to judicial processes, because the same are valid and
remained so under the legal truism announced by the majority to the effect that, under political and
international law, all official acts of a de facto government, legislative, executive or judicial, are valid.

But we have seen already how the majority excepted from said legal truism the judicial processes of
"political complexion."

And now it is stated that in annulling the processes of the governments under Japanese occupation,
General MacArthur referred to "processes other than judicial processes."

That is, the legislative and executive processes.

But, did not the majority maintain that all acts and proceedings of legislative and executive departments
of a de facto governments are good and valid? Did it not maintain that they are so as a "legal truism in
political and international law?"
Now if the reasoning of the majority to the effect that General MacArthur could not refer to judicial
processes because they are good and valid in accordance with international law, why should the same
reasoning not apply to legislative and executive processes?

Why does the majority maintain that, notwithstanding the fact that, according that said legal truism,
legislative and executive official acts of de facto governments are good and valid, General MacArthur
referred to the latter in his annulling proclamation, but not to judicial processes?

If the argument is good so as to exclude judicial processes from the effect of the October Proclamation,
we can see no logic in considering it bad with respect to legislative and executive processes.

If the argument is bad with respect to legislative and executive processes, there is no logic in holding
that it is not good with respect to judicial processes.

Therefore, if the argument of the majority opinion is good, the inevitable conclusion is that General
MacArthur did not declare null and void any processes, at all, whether legislative processes, executive
processes, or judicial processes, and that the word "processes" used by him in the October Proclamation
is a mere surplusage or an ornamental literary appendix.

The absurdity of the conclusion unmasks the utter futility of the position of the majority, which is but a
mere legal pretense that cannot stand the least analysis or the test of logic.

A great legal luminary admonished that we must have courage to unmasks pretense if we are to reach a
peace that will abide beyond the fleeting hour.

It is admitted that the commanding general of a belligerent army of occupation as an agent of his
government, "may not unlawfully suspend existing laws and promulgate new ones in the occupied
territory if and when exigencies of the military occupation demand such action," but it is doubted
whether the commanding general of the army of the restored legitimate government can exercise the
same broad legislative powers.

We beg to disagree with a theory so unreasonable and subversive.

We cannot accept that the commanding general of an army of occupation, of a rebellious army, of an
invading army, or of a usurping army, should enjoy greater legal authority during the illegal, and in the
case of the Japanese, iniquitous and bestial occupation, than the official representative of the legitimate
government, once restored in the territory wrested from the brutal invaders and aggressors. We cannot
agree with such legal travesty.

Broad and unlimited powers are granted and recognized in the commanding general of an army of
invasion, but the shadow of the vanishing alleged principle of international law is being brandished to
gag, manacle, and make completely powerless the commander of an army of liberation to wipe out the
official acts of the government for usurpation, although said acts might impair the military operation or
neutralize the public policies of the restored legitimate government.

We are not unmindful of the interest of the persons who might be adversely affected by the annulment
of the judicial processes of the governments under the Japanese regime, but we cannot help smiling
when we hear that chaos will reign or that the world will sink.

It is possible that some criminals will be let loose unpunished, but nobody has ever been alarmed that
the President, in the exercise of his constitutional powers of pardon and amnesty, had in the past
released many criminals from imprisonment. And let us not forget that due to human limitations, in all
countries, under all governments, in peace or in war, there were, there are, and there will always be
unpunished criminals, and that situation never caused despair to any one.
We can conceive of inconveniences and hardships, but they are necessary contributions to great and
noble purposes. Untold sacrifices were always offered to attain high ideals and in behalf of worthy
causes.

We cannot refrain from feeling a paternal emotion for those who are trembling with all sincerity
because of the belief that the avoidance of judicial proceedings of the governments under the Japanese
regime "would paralyze the social life of the country." To allay such fear we must remind them that the
country that produced many great hereos and martyrs; that contributed some of highest morals figures
that humanity has ever produced in all history; which inhabited by a race which was able to traverse in
immemorial times the vast expanses of the Indian Ocean and the Pacific with inadequate means of
navigation, and to inhabit in many islands so distantly located, from Madagascar to the eastern Pacific;
which made possible the wonderful resistance of Bataan and Corregidor, can not have a social life so
frail as to be easily paralyzed by the annulment of some judicial proceedings. The Japanese vandalisms
during the last three years of nightmares and bestial oppression, during the long period of our national
slavery, and the wholesale massacres and destructions in Manila and many other cities and
municipalities and populated areas, were not able to paralyze the social life of our people. Let us not
loss faith so easily in the inherent vitality of the social life of the people and country of Rizal and Mabini.

It is insinuated that because of the thought that the representative of the restored sovereign power may
set aside all judicial processes of the army of occupation, in the case to courts of a future invasions,
litigants will not summit their cases to courts whose judgement may afterwards be annulled, and
criminals would not be deterred from committing offenses in the expectancy that they may escape
penalty upon liberation of the country. We hope that Providence will never allow the Philippines to fall
again under the arms of an invading army, but if such misfortune will happen, let the October
Proclamation serve as a notice to the ruthless invaders that the official acts of the government of
occupation will not merit any recognition from the legitimate government, especially if they should not
conduct themselves, as exemplified by the Japanese, in accordance with the rules of action of a civilized
state.

One conclusive evidence of the untenableness of the majority position is the fact that it had to resort to
Executive Order No. 37, issued on March 10, 1945, providing "that all cases that have heretofore been
appealed to the Court of Appeals shall be transmitted to the Supreme Court for final decision." The far-
fetched theory is advanced that this provision impliedly recognizes the court processes during the
Japanese military occupation, on the false assumption that it refers to the Court of Appeals existing
during the Japanese regime. It is self-evident that the Executive Order could have referred only to the
Commonwealth Court of Appeals, which is the one declared abolished in said order. Certainly no one
will entertain the absurd idea that the President of the Philippines could have thought of abolishing the
Court of Appeals under the government during the Japanese occupation. Said Court of Appeals
disappeared with the ouster of the Japanese military administration from which it derived its existence
and powers. The Court of Appeals existing on March 10, 1945, at the time of the issuance of Executive
Order No. 37, was the Commonwealth Court of Appeals and it was the only one that could be abolished.

Without discussing the correctness of principle stated the majority opinion quotes from Wheaton the
following: "Moreover when it is said that occupier's acts are valid and under international law should
not be abrogated by the subsequent conqueror, it must be remembered that on crucial instances exist
to show that if his acts should be reversed, any international wrong would be committed. What does
happen is that most matters are allowed to stand by the stored government, but the matter can hardly
be put further than this." (Wheaton, International Law, War, 7th English edition of 1944, p. 245)

Then it says that there is no doubt that the subsequent conqueror has the right to abrogate most of the
acts of the occupier, such as the laws, regulations and processes other than the judicial of the
government established by the belligerent occupant.

It is evident that the statement just quoted is a complete diversion from the principle stated in the in an
unmistakable way by Wheaton, who says in definite terms that "it must be remembered that no crucial
instances exist to show that if his acts (the occupant's) should be reversed, any international wrong
would be committed."

It can be clearly seen that Wheaton does not make any distinction or point out any exception.

But in the majority opinion the principle is qualified, without stating any reason therefore, by limiting
the right of the restored government to annul "most of the acts of the occupier" and "processes other
than judicial."

The statement made by the respondent judge after quoting the above-mentioned principle, as stated by
Wheaton, to the effect that whether the acts of military occupant should be considered valid or not, is a
question that is up to the restored government to decide, and that there is no rule of international law
that denies to the restored government the right to exercise its discretion on the matter, is quoted
without discussion in the majority opinion.

As the statement is not disputed, wee are entitled to presume that it is concurred in and, therefore, the
qualifications made in the statement in the majority opinion seem to completely groundless.

THE DUTIES IMPOSED ON OCCUPANT ARMY ARE NOT LIMITATIONS TO THE RIGHTS OF THE LEGITIMATE
GOVERNMENT

The majority opinion is accumulating authorities to show the many duties imposed by international law
on the military occupant of an invaded country.

And from said duties it is deduced that the legitimate government, once restored in his own territory, is
bound to respect all the official acts of the government established by the usurping army, except judicial
processes political complexion.

The reasoning calls for immediate opposition. It is absolutely contrary to all principles of logic.

Between the duties imposed in the military occupant and the legal prerogatives of the legitimate
government there are no logical relationship or connection that might bind the ones with the others.

The military occupants is duty bound to protect the civil rights of the inhabitants, but why should the
legitimate government necessarily validate the measures adopted by the said occupant in the
performance of this duty, if the legitimate government believes his duty to annul them for weighty
reasons?

The military occupant is duty bound to establish courts of justice. Why should the legitimate
government validate the acts of said courts, if it is convinced that said courts were absolutely powerless,
as was the case during the Japanese occupation, to stop the horrible abuses of the military police, to
give relief to the victims of zoning and Fort Santiago tortures, to protect the fundamental human rights
of the Filipinos — life, property, and personal freedom?

The majority opinion recognizes in the military occupant the power to annul the official acts of the
ousted and supplanted legitimate government, a privilege which is inversely denied to the last. This
preference and predilection in favor of the military occupant, that is in favor of the invader and usurper,
and against the legitimate government, is simply disconcerting, if we have to say the least.

PRESUMPTIONS AND SUPPOSITIONS AGAINST TRUTH AND FACTS

The invading military occupant is duty bound to establish and maintain courts of justice in the invaded
territory, for the protection of the inhabitants thereof. It is presumed that the restored legitimate
government will respect the acts of said courts of the army of occupation. Therefore, it is a principle of
international law that said acts are valid and should be respected by the legitimate government. It is
presumed that General MacArthur is acquainted with such principle, discovered or revealed through
presumptive operations, and it is presumed that he had not the intention of declaring null and void the
judicial processes of the government during the Japanese regime. Therefore, his October Proclamation,
declaring null and void and without effect "all processes" of said governments, in fact, did not annul the
Japanese regime judicial processes.

So run the logic of the majority.

They don't mind the that General MacArthur speaks in the October Proclamation as follows:

NOW, THEREFORE, I, Douglas MacArthur, General, United States Army, as Commander-in-Chief of the
military forces committed to the liberation of the Philippines, do hereby proclaim and declare:

xxx xxx xxx

3. That all laws, regulations and processes of any other government in the Philippines than that of the
said Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy
occupation and control. (emphasis supplied.)

General MacArthur says categorically "all processes", but the majority insists on reading differently,
that, is: "NOT ALL processes." The majority presume, suppose, against the unequivocal meaning of
simple and well known words, that when General MacArthur said "all processes", in fact, he said "not all
processes", because it is necessary, by presumption, by supposition, to exclude judicial processes.

If where General MacArthur says "all", the majority shall insist on reading "not all", it is impossible to
foresee the consequences of such so stubborn attitude, but it is possible to understand how they
reached the unacceptable possible conclusion which we cannot be avoid opposing and exposing.

Are we to adopt and follow the policy of deciding cases submitted to our consideration, by presumption
and suppositions putting aside truths and facts? Are we to place in the documents presented to us, such
as the October Proclamation, different words than what are written therein? Are we to read "not all",
where it is written "all"?

We are afraid to such procedure is not precisely the most appropriate to keep public confidence in the
effectiveness of the administration of justice.

That is why we must insists that in the October Proclamation should be read what General MacArthur
has written in it, that is, that, besides laws and regulations, he declared and proclaimed null and void
"ALL PROCESSES", including naturally judicial processes, of the governments under the Japanese regime.

THE COMMONWEALTH COURTS HAVE NO JURISDICTION TO CONTINUE JAPANESE REGIME JUDICIAL

PROCESSES

Now we come to the third and last question propounded in the majority opinion.

The jurisdiction of the Commonwealth tribunals is defined, prescribed, and apportioned by legislative
act.

It is provided so in our Constitution. (Section 2, Article VIII.)

The Commonwealth courts of justice are continuations of the courts established before the inauguration
of the Commonwealth and before the Constitution took effect on November 15, 1935. And their
jurisdiction is the same as provided by existing laws at the time of inauguration of the Commonwealth
Government.

Act No. 136 of the Philippine Commission, known as the Organic Act of the courts of justice of the
Philippines, is the one that defines the jurisdiction of justice of the peace and municipal courts, Courts of
First Instance, and the Supreme Court. It is not necessary to mention here the jurisdiction of the Court of
Appeals, because the same has been abolished by Executive Order No. 37.

No provision may be found in Act. No. 136, nor in any other law of the Philippines, conferring on the
Commonwealth tribunals jurisdiction to continue the judicial processes or proceedings of tribunals
belonging to other governments, such as the governments established during the Japanese occupation.

The jurisdiction of our justice of the peace and municipal courts is provided in section 68, chapter V, of
Act No. 136. The original and appellate jurisdiction of the Courts of First Instance is provided in the
sections 56, 57, Chapter IV, of Act No. 136. The original and appellate jurisdiction of the Supreme Court
is provided in 17 and 18, Chapter II, of the same Act. The provisions of the above-cited do not authorize,
even implicitly, any of the decisions and judgements of tribunals of the governments, nor to continue
the processes or proceedings of said tribunals.

NECESSITY OF ENABLING ACT UNDER THE LEGAL DOCTRINE PREVAILING IN THE PHILIPPINES AND IN THE
UNITED STATES

Taking aside the question as to whether the judicial processes of the government established during the
Japanese occupation should be considered valid or not, in order that said processes could be continued
and the Commonwealth tribunals could exercise proper jurisdiction to continue them, under the well-
established legal doctrine, prevailing not only in the Philippines, but also in the proper enabling law.

Almost a half a century ago, in the instructions given by President McKinley on April 7, 1900, for the
guidance of the Philippine Commission, it was stated that, in all the forms of the govenment and
administrative provisions which they were authorized to prescribed, the Commission should bear in
mind that the government which they were establishing was designed not for the satisfaction of the
Americans or for the expression of their of their theoretical views, but for the happiness, peace and
prosperity of the people of the Philippines, and the measures adopted should be made to conform to
their customs, their habits, and even their prejudices, to the fullest extent consistent with the
accomplishment of the indispensable requisites of just and effective government.

Notwithstanding the policy so outlined, it was not enough for the Philippine Commission to create and
establish the courts of justice provided in Act No. 136, in order that said tribunals could take cognizance
and continue the judicial proceedings of the tribunals existing in the Philippines at the time the
American occupation.

It needed specific enabling provisions in order that the new tribunals might continue the processes
pending in the tribunals established by the Spaniards, and which continued to function until they were
substituted by the courts created by the Philippine Commission.

So it was done in regards to the transfer of the cases pending before the Spanish Audiencia to the newly
created Supreme Court, in sections 38 and 39 of Act No. 136 quoted as follows:

SEC. 38. Disposition of causes, actions, proceedings, appeals, records, papers, and so forth,
pending in the existing Supreme Court and in the "Contencioso Administravo." — All records,
books, papers, causes, actions, proceedings, and appeals logged, deposited, or pending in the
existing Audiencia or Supreme Court, or pending by appeal before the Spanish tribunal called
"Contencioso Administravo," are transferred to the Supreme Court above provided for which,
 has the same power and jurisdiction over them as if they had been in the first instance lodged,
filed, or pending therein, or, in case of appeal, appealed thereto.

SEC. 39. Abolition of existing Supreme Court. — The existing Audiencia or Supreme Court is
hereby abolished, and the Supreme Court provided by this Act is substituted in place thereof.

Sections 64 and 65 of the same Act allowed the same procedure as regards the transfer of cases and
processes pending in the abolished Spanish Courts of First Instance to the tribunals of the same name
established by the Philippine Commission.

SEC. 64. Disposition of records, papers, causes, and appeals, now pending in the existing Courts
of First Instance. — All records, books, papers, actions, proceedings, and appeals lodged,
deposited, or pending in the Court of First Instance as now constituted of or any province are
transferred to the Court of First Instance of such province hereby established, which shall have
the same power and jurisdiction over them as if they had been primarily lodged, deposited,
filed, or commenced therein, or in case of appeal, appealed thereto.

SEC. 65. Abolition of existing Courts of First Instance. — The existing Courts First Instance are
hereby abolished, and the Courts of First Instance provided by this Act are substituted in place
thereof.

The same procedure has been followed by the Philippine Commission eventhough the courts of origin of
the judicial processes to be transferred and continued belonged to the same government and
sovereignty of the courts which are empowered to continue said processes.

So section 78 of Act No. 136, after the repeal of all acts conferring upon American provost courts in the
Philippines jurisdiction over civil actions, expressly provided that said civil actions shall be transferred to
the newly created tribunals.

And it provided specifically that "the Supreme Court, Courts of the First Instance and courts of the
justice of the peace established by this Act (No. 136) are authorized to try and determine the actions so
transferred to them respectively from the provost courts, in the same manner and with the same legal
effect as though such actions had originally been commenced in the courts created" by virtue of said
Act.

MUNICIPAL COURTS UNDER ACT NO. 183

On July 30, 1901, the Philippine Commission enacted the Organic Act of the City of Manila, No. 183.

Two municipal courts for the city were created by section 40 of said Act, one for the northern side of
Pasig River and the other for the southern side.

They were courts with criminal jurisdiction or identical cases under the jurisdiction of the justices of the
peace then existing in Manila. Although both courts were of the same jurisdiction, in order that the
criminal cases belonging to the justice of the peace courts may be transferred to the municipal courts
just created, and the proceedings may be continued by the same, the Philippine Commission considered
it necessary to pas the proper enabling act.

So on August 5, 1901, it enacted Act No. 186, section 2 of which provides that all criminal cases and
proceedings pending in the justices of the peace of Manila are transferred to the municipal courts,
which are conferred the jurisdiction to continue said cases and proceedings.

THE CABANTAG CASE

On August 1, 1901, Narciso Cabantag was convicted of murder by a military commission.
(Cabantag vs. Wolfe, 6 Phil., 273.) The decision was confirmed on December 10, 1901, and his execution
by hanging was set for January 12,1902. .

On December 26, 1901, he fled, but surrendered to the authorities on July 18, 1902. The Civil Governor
on December 2, 1903, commuted the death penalty to 20 years imprisonment. The commutation was
approved by the Secretary of War, following instructions of the President.

Cabantag filed later a writ of habeas corpus on the theory that, with the abolition of the military
commission which convicted him, there was no existing tribunal which could order the execution of the
penalty of imprisonment.

The Supreme Court denied the writ, but stated that, if the petitioner had filed the writ before the
enactment of Act No. 865, the question presented to the Supreme Court would have been different.

Act No. 865, enacted on September 3, 1903, is enabling law, wherein it is provided that decisions
rendered by the provost courts and military commission shall be ordered executed by the Courts of First
Instance in accordance with the procedure outlined in said Act.

It is evident from the foregoing that this Supreme Court has accepted and confirmed the doctrine of the
necessity of an enabling act in order that our Courts of First Instance could exercise jurisdiction to
execute the decision of the abolished provost courts and military commission.

It is evident that the doctrine is applicable, with more force, to the judicial processes coming from
governments deriving their authority from a foreign enemy state.

THE DOCTRINE IN THE UNITED STATES

It is also evident that the Congress of the United States, by enacting the Bill of the Philippines on July 1,
1902, confirmed also the same doctrine.

In effect, in section 9 of said Act, the Congress approved what the Philippine Commission did as to the
jurisdiction of the courts established and transfer of cases and judicial processes, as provided in Acts
Nos. 136, 186, and 865.

The same doctrine was adopted by the United States government as part of its international policy, as
could be seen in Article XII of the Treaty concluded with Spain on December 10, 1898, in Paris.

Even in 1866 the Congress of the United States followed the same doctrine.

The suit, shown by the record, was originally instituted in the District Court of the United States
for the District of Louisiana, where a decree was rendered for the libellant. From the decree an
appeal was taken to the Circuit Court, where the case was pending, when in 1861, the
proceedings of the court were interrupted by the civil war. Louisiana had become involved in
the rebellion, and the courts and officers of the United States were excluded from its limits. In
1862, however, the National authority had been partially reestablished in the State, though still
liable to the overthrown by the vicissitudes of war. The troops of the Union occupied New
Orleans, and held military possession of the city and such other portions of the State as had
submitted to the General Government. The nature of this occupation and possession was fully
explained in the case of The Vinice.

Whilst it continued, on the 20th of October, 1862, President Lincoln, by proclamation, instituted
a Provisional Court of the State of Louisiana, with authority, among other powers, to hear, try,
and determine all causes in admiralty. Subsequently, by consent of parties, this cause was
 transferred into the Provisional Court thus, constituted, and was heard, and a decree was again
rendered in favor of the libellants. Upon the restoration of civil authority in the State, the
Provincial Court, limited in duration, according to the terms of the proclamation, by the event,
ceased to exist.

On the 28th of July, 1866, Congress enacted that all suits, causes and proceedings in the
Provisional Court, proper for the jurisdiction of the Circuit Court of the United States for the
Eastern District of Louisiana, should be transferred to that court, and heard, and determined
therein; and that all judgements, orders, and decrees of the Provisional Court in causes
transferred to the Circuit Court should at once become the orders, judgements, and decrees of
that court, and might be enforced, pleaded, and proved accordingly.

It is questioned upon these facts whether the establishment by the President of a Provisional
Court was warranted by the Constitution.

xxx xxx xxx

We have no doubt that the Provisional Court of Louisiana was properly established by the
President in the exercise of this constitutional authority during war; or that Congress had power,
upon the close of the war, and the dissolution of the Provisional Court, to provide for the
transfer of cases pending in that court, and of its judgement and decrees, to the proper courts
of the United States. (U. S. Reports, Wallace, Vol. 9, The Grapeshot, 131-133.)

JUDGEMENTS OF THE REBEL COURTS IN LOUISIANA WERE VALIDATED BY CONSTITUTIONAL

PROVISION

During the civil war in 1861, the prevailing rebel forces established their own government in Louisiana.

When the rebel forces were overpowered by the Union Forces and the de facto government was
replaced by the de jure government, to give effect to the judgments and other judicial acts of the rebel
government, from January 26, 1861, up to the date of the adoption of the State Constitution, a provision
to said effect was inserted in said document.

Section 149 of the Louisiana Constitution reads as follows:

All the rights, actions, prosecutions, claims, contracts, and all laws in force at the time of the
adoption of this Constitution, and not inconsistent therewith, shall continue as if it had not been
adopted; all judgments and judicial sales, marriages, and executed contracts made in good faith
and in accordance with existing laws in this State rendered, made, or entered into, between the
26th day of January, 1861, and the date when this constitution shall be adopted, are hereby
declared to be valid, etc. (U. S. Report, Wallace, Vol. 22, Mechanics' etc. Bank vs. Union Bank,
281.)

EVEN AMONG SISTERS STATES OF THE UNITED STATES JUDGEMENTS ARE NOT EXECUTORY

The member states of the United States of America belong to the same nation, to the country, and are
under the same sovereignty.

But judgements rendered in one state are not executory in other states.

To give them effect in other states it is necessary to initiate an original judicial proceedings, and therein
the defendants in the domestic suit may plead bar the sister state judgement puis darrien continuance.
(Wharton, on the Conflict of Laws, Vol. II, p. 1411.)
 Under the Constitution of the United States, when a judgement of one state in the Union is
offered in a court of a sister state as the basis of a suit nil debet cannot be pleaded. The only
proper plea is nul tielrecord. (Id., p. 1413.).

It is competent for the defendant, however, to an action on a judgement of a sister state, as to

an action on a foreign judgement, to set up as a defense, want of jurisdiction of the court
rendering the judgement; and, as indicating such want of jurisdiction, to aver by plea that the
defendant was not an inhabitant of the state rendering the judgement, and had not been served
with process, and did not enter his appearance; or that the attorney was without authority to
appear. (Id., pp. 1414-1415.)

The inevitable consequence is that the courts of the Commonwealth of the Philippines, in the absence of
an enabling act or of an express legislative grant, have no jurisdiction to take cognizance and continue
the judicial processes, procedures, and proceedings of the tribunals which were created by the Japanese
Military Administration and functioned under the Vargas Philippine Executive Commission of the Laurel
Republic of the Philippines, deriving their authority from the Emperor, the absolute ruler of Japan, the
invading enemy, and not from the Filipino people in whom, according to the Constitution, sovereignty
resides, and from whom all powers of government emanate.

The position of Honorable Asenio P. Dizon, the respondent judge of the Court of the First Instance of
Manila in declaring himself without jurisdiction nor authority to continue the proceedings which
provoked the present controversy, being a judicial process of a Japanese sponsored government, is
absolutely correct, under the legal doctrines established by the United States and the Philippine
Government, and consistently, invariably, and without exception, followed by the same.

If we accept, for the sake of argument, the false hypothesis that the Commonwealth tribunals have
jurisdiction to continue the judicial processes left pending by the courts of the governments established
under the Japanese regime, the courts which disappeared and, automatically, ceased to function with
the ouster of the enemy, the position of the Judge Dizon, in declining to continue the case, is still
unassailable, because, for all legal purposes, it is the same as if the judicial processes in said case were
not taken at all, as inevitable result of the sweeping and absolute annulment declared by the General
MacArthur in the October Proclamation.

In said proclamation it is declared in unmistakable and definite terms that "ALL PROCESSES" of the
Japanese sponsored governments "ARE NULL AND VOID AND WITHOUT LEGAL EFFECT", and they shall
remain so until the Commonwealth, through its legislative power, decides otherwise in a proper
validating act.

The fact that the Japanese invaders, under international law, were in duty bound to establish courts of
justice during the occupation, although they made them completely powerless to safeguard the
constitutional rights of the citizens, and mere figureheads as regards the fundamental liberties of the
helpless men, women and children of our people, so much so that said courts could not offer even the
semblance of protection when the life, the liberty, the honor and dignity of our individual citizens were
wantonly trampled by any Japanese, military or civilian, does not change the situation. "ALL PROCESSES"
of said court are declared "NULL AND VOID AND WITHOUT LEGAL EFFECT" in the October proclamation,
and we do not have any other alternative but to accept the law, as said proclamation has the full force
of a law.

The fact that in the past, the legitimate governments, once restored in their own territory,
condescended in many cases to recognize and to give effect to judgments rendered by courts under the
governments set up by an invading military occupant or by a rebel army, does not elevate such
condescension to the category of a principle, when Wheaton declares that no international wrong is
done if the acts of the invader are reversed.
Many irrelevant authorities were cited to us as to the duties imposed by the international law on
military occupants, but no authority has been cited to the effect that the representative of the restored
legitimate government is a bound to recognize and accept as valid the acts and processes of said
occupants. On the contrary, Wheaton says that if the occupant's acts are reversed "no international
wrong would be committed."

Following the authority of Wheaton, undisputed by the majority, General MacArthur thought, as the
wisest course, of declaring "NULL AND VOID AND WITHOUT EFFECT," by official proclamation, "ALL
PROCESSES" under the Japanese regime, that is legislative, executive and judicial processes, which fall
under the absolute adjective "ALL".

That declaration is a law. It is a law that everybody bound to accept and respect, as all laws must be
accepted and respected. It is a law that the tribunals are duty bound to give effect and apply.

We are not unmindful of the adverse consequences to some individuals of the annullment of all the
judicial processes under the Japanese regime, as provided in the October Proclamation, but the
tribunals are not guardians of the legislative authorities, either an army commander in chief, during war,
or a normal legislature, in peace time. The tribunals are not called upon to guide the legislative
authorities to the wisdom of the laws to be enacted. That is the legislative responsibility. Our duty and
our responsibility is to see to it that the law, once enacted, be applied and complied with.

No matter the consequences, no matter who might be adversely affected, a judge must have the firm
resolve and the courage to do his duty, as, in the present case, Judge Dizon did, without fear nor favor.
We cannot see any reason why we should not uphold him in his stand in upholding the law.

It is our official duty, national and international duty. Yes. Because this Supreme Court is sitting, not only
as a national court, but as an international court, as is correctly stated in the concurring opinion of
Justice De Joya, and we should feel the full weight of the corresponding responsibility, as the American
courts with admiralty jurisdiction and the Prize Courts of England did feel. In fact, it is in the judiciary
where, more than in any point of view is more pressing, more imperative, more unavoidable. Justice has
no country. It is of all countries. The horizon of justice cannot be limited by the scene where our
tribunals are functioning and moving. That horizon is boundless. That is why in our constitution the bill
of rights has been written not for Filipinos, but for all persons. They are rights that belong to men, not as
Filipinos, Americans, Russians, Chinese or Malayan, but as a members of humanity. The international
character of our duty to administer justice has become more specific by the membership of our country
in the United Nations. And let us not forget, as an elemental thing, that our primary duty is to uphold
and apply the law, as it is; that we must not replace the words of the law with what we might be inclined
to surmise; that what is clearly and definitely provided should not be substituted with conjectures and
suppositions; that we should not try to deduce a contrary intention to that which is unequivocally stated
in the law; that we should not hold valid what is conclusively declared null and void.

The October Proclamation declared "ALL PROCESSES" under the Japanese regime "AND VOID WITHOUT
EFFECT", so they must stand. There is no possible way of evasion. "ALL PROCESSES", in view of the
meaning of the absolute adjective "ALL", include "JUDICIAL PROCESSES". Allegatio contra factum non est
admittenda.

CONCLUSION

For all the foregoing reasons we conclude:

1. That General MacArthur had full legal authority to issue the October Proclamation, and that no
principle of the international law is violated by said proclamation, no international wrong being
committed by the reversal by the legitimate government of the acts of the military invader.

2. That said proclamation was issued in full conformity with the official policies to which the United
States and Philippine Governments were committed, and the annulment of all the facts of the
governments under the Japanese regime, legislative, executive, and judicial, is legal, and justified by the
wrongs committed by the Japanese.

3. That when General MacArthur proclaimed and declared in the October Proclamation "That all laws,
regulations and processes" of the Japanese sponsored governments, during enemy occupation, "are null
and void and without effect", he meant exactly what he said.

4. That where General MacArthur said "all processes" we must read and understand precisely and
exactly "all processes", and not "some processes". "All" and "some" have incompatible meanings and
are not interchangeable.

5. That the word "processes" includes judicial procedures, proceedings, processes, and cases. Therefore,
"all processes" must include "all judicial processes.".

6. That we have no right to attribute General MacArthur an intention different from what he has plainly,
clearly, unmistakably expressed in unambiguous words with familiar meaning generally understood by
the common man.

7. That the judicial proceedings here in question are included among those adversely affected by the
October Proclamation.

8. That the Commonwealth tribunals have no jurisdiction to take cognizance of nor to continue the
judicial proceedings under the Japanese regime.

9. That to exercise said jurisdiction an enabling act of the Congress is necessary.

10. That respondent Judge Dizon did not commit the error complained of in the petition, and that the
petition has no merits at all.

We refuse to follow the course of action taken by the majority in the present case. It is a course based
on a mistaken conception of the principles of international law and their interpretation and application,
and on a pinchbeck. It is a course based on misconstruction or misunderstanding of the October
Proclamation, in utter disregard of the most elemental principles of legal here meneutics. It is a course
that leads to nowhere, except to the brink of disaster, because it is following the dangerous path of
ignoring or disobeying the law.

Let us not allow ourselves to be deceived. The issue confronting us is not of passing importance. It is an
issue of awesome magnitude and transcendency. It goes to and reaches the very bottom. It is simple.
Lacking in complexities. But it may shake the very foundation of society, the cornerstone of the state,
the primary pillar of the nation. It may dry the very foundation of social life, the source of vitalizing sap
that nurtures the body politic. The issue is between the validity of one or more Japanese regime
processes and the sanctity of the law.

That is the question, reduced to its ultimate terms. it is a simple dilemma that is facing us. It is the alpha
and the omega of the whole issue. Either the processes, or the law. We have to select between two,
which to uphold. It is a dilemma that does not admit of middle terms, or of middle ways where we can
loiter with happy unconcern . We are in the cross road: which way shall we follow? The processes and
the law are placed in the opposite ends of the balance. Shall we inclined the balance of justice to uphold
the processes and defeat law, or vice versa?

We feel jittery because some judicial processes might be rescinded or annulled, but we do not tremble
with sincere alarm at the thought of putting the law under the axe, of sentencing law to be executed by
the guillotine. We feel uneasy, fancying chaos and paralyzation of social life, because some litigants in
cases during the Japanese regime will be affected in their private interests, with the annulment of some
judicial processes, but we adopt an attitude of complete nonchalance in throwing law overboard. This
baffling attitude is a judicial puzzle that nobody will understand. So it is better that we should shift to a
more understandable way, that which is conformable to the standard that the world expects in judicial
action.

No amount of arguments and lucubration's, no amount of speculative gymnastics, no amount of juggling

of immaterial principles of international law, no amount of presumptions and suppositions, surmises
and conjectures, no amount of dexterity in juridical exegesis can divert our attention from the real,
simple, looming, hypostasis of the issue before us: Law. It is Law with all its majestic grandeur which we
are defying and intending to overthrow from the sacred pedestal where the ages had placed her as a
goddess, to be enshrined, obeyed, and venerated by men, forever. Let us not dare to lay our profaning
hands on her vestal virginity, lest the oracle should fling at us the thunder of his prophetic anathema.

We cannot therefore vote except for the denial of the petition.

HILADO, J., dissenting:

I dissent from the opinion of the majority and, pursuant to the Constitution, proceed to state the reason
for my dissent.

The proceeding involved in the case at bar were commenced by a complaint filed by the instant
petitioner, as plaintiff, on November 18, 1944, in civil case No. 3012 of the so-called Court of First
Instance of Manila, the complaint bearing this heading and title: "The Republic of the Philippines — In
the Court of First Instance of Manila" (Annex X of Exhibit A of petition for mandamus). The farthest that
said proceedings had gone before the record was burned or destroyed during the battle for Manila, was
the filing by counsel for plaintiff therein of their opposition to a motion for dismissal filed by opposing
counsel.

It is, therefore, plain that the case had not been heard on the merits when the record was burned or
destroyed.

The respondent judge, in his order dated June 6, 1945, disposing of the petition dated May 25, 1945
filed by petitioner, as a plaintiff in said case, and of the petition filed by respondent Eusebio Valdez Tan
Keh, as defendant therein, on May 31, 19045, held: " first, that by virtue of the proclamation of General
MacArthur quoted above, all laws, regulations and processes of any other government in the Philippines
than that of the Commonwealth became null and void and without legal effect in Manila on February 3,
1945 or, at the lates, on February 27 of the same year; second that the proceedings and processes had in
the present case having been before a court of the Republic of the Philippines and in accordance with
the laws and regulations of said Republic, the same are now void and without legal effect; third, that this
Court as one of the different courts of general jurisdiction of the Commonwealth of the Philippines, has
no authority to take cognizance of and continue said proceedings to final judgement, until and unless
the Government of the Commonwealth of the Philippines, in the manner and form provided by law,
shall have provided for the transfer of the jurisdiction of the courts of the now defunct Republic of the
Philippines, and the causes commenced and left pending therein, to the courts created and organized by
virtue of the provisions of Act No. 4007, as revived by Executive Order No. 36, or for the validation of all
proceedings had in said courts."

Petitioner prays that this Court declare that the respondent judge should not have ordered the
suspension of the proceedings in civil case No. 3012 and should continue and dispose of all the incidents
in said case till its complete termination. In my opinion, the petition should denied.

In stating the reasons for this dissent, we may divide the arguments under the following propositions:

1. The proceedings in said civil case No. 3012 are null and void under General of the Army MacArthur's
proclamation of October 23, 1944 (41 Off. Gaz., 147, 148);

2. (a) The government styled as, first, the "Philippine Executive Commission "and later as the Republic of
the Philippines", established here by the Commander in Chief of the Imperial Japanese Forces or by his
order was not a de-facto government — the so-called Court of First Instance of Manila was not a de
facto court, and the judge who presided it was not a de facto judge; (b) the rules of International Law
regarding the establishment of ade facto Government in territory belonging to a belligerent but
occupied or controlled by an opposing belligerent are inapplicable to the governments thus established
here by Japan;

3. The courts of those governments were entirely different from our Commonwealth courts before and
after the Japanese occupation;

4. The question boils down to whether the Commonwealth Government, as now restored, is to be
bound by the acts of either or both of those Japanese-sponsored governments;

5. Even consideration of policy of practical convenience militate against petitioner's contention.

The proceedings in said civil case No. 3012 are null and void under General of the Army
MacArthur's proclamation of October 23, 1944 (41 Off. Gaz., 147, 148).

In this proclamation, after reciting certain now historic facts, among which was that the so-called
government styled as the "Republic of the Philippines" was established on October 14, 1943 "under
enemy duress, . . . based upon neither the free expression of the people's will nor the sanction of the
Government of the United States," the great Commander-in-Chief proclaimed and declared:

xxx xxx xxx

3. That all laws, regulations and processes of any other government in the Philippines than that
of the said Commonwealth are null and void and without legal effect in areas of the Philippines
free of enemy occupation and control; and

xxx xxx xxx

I do enjoin upon all loyal citizens of the Philippines full respect for and obedience to the
Constitution of the Commonwealth of the Philippines and the laws, regulations and other acts of
their duly constituted government whose seat is now firmly re-established on Philippine soil.

The evident meaning and effect of the 3rd paragraph above quoted is, I think, that as the different areas
of the Philippines were progressively liberated, the declaration of nullity therein contained shall attach
to the laws, regulations and processes thus condemned in so far as said areas were concerned. Mark
that the proclamation did not provide that such laws, regulations and processes shall be or are annulled,
but that they are null and void. Annulment implies some degree of the effectiveness in the act annulled
previous to the annulment, but a declaration of nullity denotes that the act is null and void ab initio —
the nullity precedes the declaration. The proclamation speaks in the present tense, not in the future. If
so, the fact that the declaration of nullity as to the condemned laws, regulations, and processes in areas
not yet free from enemy occupation and control upon the date of the proclamation, would attach
thereto at a later date, is no argument for giving them validity or effectiveness in the interregnum. By
the very terms of the proclamation itself, that nullity had to date back from the inception of such laws,
regulations and processes; and to dispel any shadow of doubt which may still remain, we need only
consider the concluding paragraph of the proclamation wherein the Commander in Chief of the army
liberation solemnly enjoined upon all loyal citizens of the Philippines full respect for and obedience to
the Constitution of the Commonwealth of the Philippines and the laws, regulations and other acts of
their duly constituted government. This is all-inclusive — it comprises not only the loyal citizens in the
liberated areas but also those in areas still under enemy occupation and control. It will be noticed that
the complaint in said civil case No. 3012 was filed twenty-six days after the above-quoted proclamations
of General of the Army MacArthur. If the parties to said case were to consider the proceedings therein
up to the date of the liberation of Manila valid and binding, they would hardly be complying with the
severe injunction to render full respect for and obedience to our Constitution and the laws, regulations
and other acts of our duly constituted government from October 23, 1944, onwards. Indeed, to my
mind, in choosing between these two courses of action, they would be dangerously standing on the
dividing line between loyalty and disloyalty to this country and its government.

The proceeding in question, having been had before the liberation of Manila, were unquestionably
"processes" of the Japanese-sponsored government in the Philippines within the meaning of the
aforesaid proclamation of General of the Army MacArthur and, consequently, fall within the
condemnation of the proclamation. Being processes of a branch of a government which had been
established in the hostility to the Commonwealth Government, as well as the United States
Government, they could not very well be considered by the parties to be valid and binding, at least after
October 23, 1944, without said parties incurring in disobedience and contempt of the proclamation
which enjoins them to render full respect for the obedience to our Constitution and the laws,
regulations and other acts of our duly constituted government. Nine days after the inauguration of the
so-called "Republic of the Philippines," President Franklin Delano Roosevelt of the United States
declared in one of his most memorable pronouncements about the activities of the enemy in the
Philippines, as follows:

One of the fourtheenth of this month, a puppet government was set up in the Philippine Island
with Jose P. Laurel, formerly a justice of the Philippine Supreme Court, as "president." Jorge
Vargas, formerly as a member of the Commonwealth Cabinet, and Benigno Aquino, also
formerly a member of that cabinet, were closely associated with Laurel in this movement. The
first act of the new puppet regime was to sign a military alliance with Japan. The second act was
a hyphocritical appeal for American sympathy which was made in fraud and deceit, and was
designed to confuse and mislead the Filipino people.

I wish to make it clear that neither the former collaborationist "Philippine Executive
Commission" nor the present "Philippine Republic " has the recognition or sympathy of the
Government of the United States. . . .

Our symphaty goes out to those who remain loyal to the United States and the Commonwealth
— that great majority of the Filipino people who have not been deceived by the promises of the
enemy.

October 23, 1943.

FRANKLIN DELANO ROOSEVELT

President of the United States
 (Form U.S. Naval War College International Law Documents, 1943, pp. 93, 94.).

It is a fact of contemporary history that while President Manuel L. Quezon of the Philippines was in
Washington, D.C., with his exiled government, he also repeatedly condemned both the "Philippine
Executive Commission" and the "Philippine Republic," as they had been established by or under orders
of the Commander in Chief of the Imperial Japanese Forces. With these two heads of the Governments
of the United States and the Commonwealth of the Philippines condemning the "puppet regime" from
its very inception, it is beyond my comprehension to see how the proceedings in question could be
considered valid and binding without adopting an attitude incompatible with theirs. As President
Roosevelt said in his above quoted message, "Our symphaty goes out to those remain loyal to the
United States and the Commonwealth — that great majority of the Filipino people who have not been
deceived by the promises of the enemy.

The most that I can concede is that while the Japanese Army of occupation was in control in the Islands
and their paramount military strength gave those of our people who were within their reach no other
alternative, these had to obey their orders and decrees, but the only reason for such obedience would
be that paramount military strength and not any intrinsic legal validity in the enemy's orders and
decrees. And once that paramount military strength disappeared, the reason for the obedience
vanished, and obedience should likewise cease.

As was stated by the Supreme Court of the United States in the case of Williams vs. Bruffy (96 U.S., 176;
24 Law. ed., 719), "In the face of an overwhelming force, obedience in such matters may often be a
necessity and, in the interest of order, a duty. No concession is thus made to the rightfulness of the
authority exercised." (Emphasis ours.) The court there refers to its own former decision in
Thorington vs. Smith, and makes it clear that the doctrine in the Thorington case, so far as the effects of
the acts of the provisional government maintained by the British in Casetine, from September, 1814 to
the Treaty of Peace in 1815, and the consideration of Tampico as United States territory, were
concerned, was limited to the period during which the British, in the first case, retained possession of
Castine, and the United States, in the second, retained possession of Tampico. In referring to the
Confederate Government during the Civil War, as mentioned in the Thorington case, the court again
says in effect that the actual supremacy of the Confederate Government over a portion of the territory
of the Union was the only reason for holding that its inhabitants could not but obey its authority. But the
court was careful to limit this to the time when that actual supremacy existed, when it said: . . .
individual resistance to its authority then would have been futile and, therefore, unjustifiable."
(Emphasis ours.)

Because of its pertinence, we beg leave to quote the following paragraph from that leading decision:

There is nothing in the language used in Thorington vs. Smith (supra), which conflicts with these
views. In that case, the Confederate Government is characterized as one of paramount force,
and classed among the governments of which the one maintained by great Britain in Castine,
from September 1814, to the Treaty of Peace in 1815, and the one maintained by the United
States in Tampico, during our War with Mexico, are examples. Whilst the
British retained possession of Castine, the inhabitants were held to be subject to such laws as
the British Government chose to recognize and impose. Whilst the United
Statesretained possession of Tampico, it was held that it must regarded and respected as their
territory. The Confederate Government, the court observed, differed from these temporary
governments in the circumstance that its authority did not justifying acts of hostility to the
United States, "Made obedience to its authority in civil and local matters not only a necessity,
but a duty." All that was meant by this language was, that as the actual supremancy of the
Confederate Government existed over certain territory, individual resistance to its
authority then would have been futile and, therefore, unjustifiable. In the face of an
overwhelming force, obedience in such matters may often be a necessity and, in the interest of
order, a duty. No concession is thus made to the rightfulness of the authority exercised.
(Williams vs. Bruffy, 24 Law ed., 719; emphasis ours.)
The majority opinion, in considering valid the proceedings in question, invokes the rule that when a
belligerent army occupies a territory belonging to the enemy, the former through its Commander in
Chief, has the power to establish thereon what the decisions and treaties have variously denominated
provisional or military government, and the majority holds that the Japanese-sponsored government in
the Philippines was such a government. Without prejudice to later discussing the effects which the
renunciation of war as an instrument of national policy contained in our Commonwealth Constitution, as
well as in the Briand-Kellog Pact, must have produced in this rule in so far as the Philippines is
concerned, let us set forth some considerations apropos of this conclusion of the majority. If the power
to establish here such a provisional government is recognized in the Commander in Chief of the invasion
army, why should we not recognize at least an equal power in the Commander in Chief of the liberation
army to overthrow that government will all of its acts, at least of those of an executory nature upon the
time of liberation? Considering the theory maintained by the majority, it would seem that they would
recognize in the Japanese Commander in Chief the power to overthrow the Commonwealth
Government, and all of its acts and institutions if he had choosen to. Why should at least an equal power
be denied the Commander in Chief of the United States Army to overthrow the substitute government
thus erected by the enemy with all of its acts and institutions which are still not beyond retrieve?
Hereafter we shall have occasion to discuss the aspects of this question from the point of view of policy
or the practical convenience of the inhabitants. If the Japanese Commander in Chief represented
sovereignty of Japan, the American Commander in Chief represented the sovereignty of the United
States, as well as the Government of the Commonwealth. If Japan had won this war, her paramount
military supremacy would have continued to be exerted upon the Filipino people, and out of sheer
physical compulsion this country would have had to bow to the continuance of the puppet regime that
she had set up here for an indefinite time. In such a case, we admit that, not because the acts of that
government would then have intrinsically been legal and valid, but simply because of the paramount
military force to which our people would then have continued to be subjected, they would have had to
recognize as binding and obligatory the acts of the different departments of that government. But
fortunately for the Filipinos and for the entire civilized world, Japan was defeated. And I now ask: Now
that Japan has been defeated, why should the Filipinos be still bound to respect or recognize validity in
the acts of the Japanese-sponsored government which has been so severely condemned by both the
heads of the United States and our Commonwealth Government throughout the duration of the war? If
we were to draw a parallel between that government and that which was established by the
Confederate States during the American Civil War, we will find that both met with ultimate failure. And,
in my opinion, the conclusion to be drawn should be the same in both cases.

As held by the United States Supreme Court in Williams vs. Bruffy (supra), referring to the Confederate
Government, its failure carried with it the dissipation of its pretentions and the breaking down in pieces
of the whole fabric of its government. The Court said among other things:

The immense power exercised by the government of the Confederate States for nearly four
years, the territory over which it extended, the vast resources it wielded, and the millions who
acknowledged its authority, present an imposing spectacle well fitted to mislead the mind in
considering the legal character of that organization. It claimed to represent an independent
nation and to posses sovereign powers; as such to displace to jurisdiction and authority of the
United States from nearly half of their territory and, instead of their laws, to substitute and
enforce those of its own enactment. Its pretentions being resisted, they were submitted to the
arbitrament of war. In that contest the Confederacy failed; and in its failure its pretentions were
dissipated, its armies scattered, and the whole fabric of its government broken in pieces. (24
Law, ed., 719; emphasis ours.)

By analogy, if the Japanese invasion and occupation of the Philippines had been lawful — which,
however, is not the case — and if Japan had succeeded in permanently maintaining the government that
she established in the Philippines, which would have been the case had victory been hers, there would
be more reason for holding the acts of that government valid, but because Japan has lost the war and,
therefore, failed in giving permanence to that government, the contrary conclusion should legitimately
follow.
The validity of legislation exercised by either contestant "depends not upon the existence of hostilities
but upon the ultimate success of the party which it is adopted" (emphasis ours). And, referring to the
overthrow of the of the Confederacy, the Court, said, "when its military forces were overthrown, it
utterly perished, and with it all its enactments" (emphasis ours)

The majority cite on page 9-10 of their opinion a passage from the same case of
Williams vs. Bruffy, supra, which is a mere obiter dictum. The majority opinion says that in this passage
the Court was "discussing the validity of the acts of the Confederate States." In the first place, an
examination of the decision will reveal that the controversy dealt with an act of the Confederate
Government, not of the Confederate States individually; and in the second place, the quoted passage
refers to something which was not in issue in the case, namely, the acts of the individual States
composing the Confederacy. But even this passage clearly places the case at bar apart from the Court's
pronouncement therein. The quoted passage commences by stating that "The same general form of
government the same general laws for the administration of justice and the protection of private rights,
which has existed in the States prior to the rebellion, remanded during (its) continuance and afterwards.
"In the case at bar, the same general form of the Commonwealth Government did not continue under
the Japanese, for the simple reason that one of the first acts of the invaders was to overthrow the
Commonwealth Constitution and, therefore, the constitutional government which existed thereunder,
as an effect of the following acts and decrees of the Commander in Chief of the Imperial Japanese
Forces:

1. Order No. 3, dated February 20, 1942 of the Commander in Chief of the Imperial Japanese Forces to
the Chairman of the Philippine Executive Commission directed that, in the exercise of legislative,
executive and judicial powers in the Philippines, the "activities" of the "administrative organs and
judicial courts in the Philippines shall be based upon the existing status, order, ordinances and the
Commonwealth Constitution (1 Official Journal of the Japanese Military Administration, page 34). Under
the frame of government existing in this Commonwealth upon the date of the Japanese invasion, the
Constitution was the very fountain-head of the validity and effects of all the "status, orders, and
ordinances" mentioned by the Japanese Commander in Chief, and in overthrowing the Constitution he,
in effect, overthrew all of them.

2. Instruction No. 6 of the Japanese Military Administration (Vol. 1, usages 36 et seq., Official Gazette,
edited at the Office of the Executive Commission) gave the "Detailed Instruction Based on Guiding
Principle of the Administration," and among other things required "The entire personnel shall be
required to pledge their loyalty to the Imperial Japanese Forces. . . ." (This, of course, was repugnant to
the frame of government existing here under the Commonwealth Constitution upon the date of
invasion.)

3. Proclamation dated January 3, 19452 of the Japanese Commander in Chief provided in paragraph 3
that "The Authorities and the People of the Commonwealth should sever their relations with the U.S. o .
. ." (This is, likewise, repugnant to the Commonwealth Constitution and the to the Government of that
Commonwealth Constitution and to the Government of that Commonwealth which was expressly made
subject to the supreme sovereignty of the United States until complete independence is granted, not by
the mere will of the United States, but by virtue of an agreement between that Government and ours,
under the Tydings-McDuffie Act.)

The individual States of the Confederate and their governments existed prior to the Civil War and had
received the sanction and recognition of the Union Government, for which the Federal Supreme Court
was speaking in the Williams-Bruffy case; while the Japanese-sponsored governments of the "Philippine
Executive Commission" and the Republic of the Philippines" neither existed here before the war nor had
received the recognition or sanction of either the United States or the Commonwealth Government —
nay, they had received the most vigorous condemnation of both.

The Court further says in Williams vs. Bruffy (supra):

 No case has been cited in argument, and we think unsuccesfully attempting to establish a
separate revolutionary government have been sustained as a matter of legal right. As justly
observed by the late Chief Justice in the case of Shortridge vs. Macon, I Abb. U.S., 58, decided at
the circuit, and, in all material respects like the one at bar, "Those who engage in rebellion must
consider the consequences. If theysucceed, rebellion becomes revolution, and the new
government will justify is founders. If they fail, all their acts hostile to the rightful government
are violations of law, and originate no rights which can be recognized by the courts of the nation
whose authority and existence have been alike assailed. S.C., Chase, Dec., 136.
(Williams vs. Bruffy, 96 U.S., 176; 24 Law. ed., 716, 718.) (Emphasis ours.)

I am of opinion that the principles thus enunciated for the case of an unsuccessful rebellion should be
applied with greater force to the case of a belligerent who loss the war. And since the founding of the
Japanese-sponsored government in the Philippines was designed to supplant and did actually supplant
the rightful government and since all its acts could not but a hostile to the latter (however blameless the
officials who acted under enemy duress might be), and since Japan failed, all said acts, particularly those
of the Japanese-sponsored court in said civil case No. 3012, "are violations of law, and originate no
rights which can be recognized by the courts of the nation whose authority and existence have been
alike assailed", quoting the language of the court in Shortridgevs. Macon, cited by Mr. Justice Field in
Williams vs. Bruffy, supra (24 Law. ed., 718).

II

(a) The government styled as, first, the "Philippine Executive Commission" and later as the
Republic of the Philippines", established here by the Commander in Chief of the Imperial
Japanese Forces or by the his order was not a de facto government--the so-called Court of First
Instance of Manila was not a de factocourt and the who presided it was not a de facto judge;

(b) The rules of International Law regarding the establishment of a de facto government in
territory belonging to a belligerent but occupied or controlled by an opposing belligerent are
inapplicable to the governments thus established here by Japan.

Under the doctrine of Williams vs. Bruffy, supra, and the pertinent cases therein cited, the short-lived
provisional government thus established by the Japanese in the Philippines should be classified, at best,
as a government of paramount force. But this is not all. The Constitution of this Commonwealth which
has been expressly approved by the United States Government, in Article II, section 3, under the
heading "Declaration of Principles", renounces war as an instrument of national policy. This renunciation
of war as an instruments of national policy follows an equal renunciation in the Briand-Kellog Pact. The
rules of International Law , cited in support of the power or right of a belligerent army of occupation to
set up a provisional government on occupied enemy territory, were evolved prior to the first World War,
but the horrors and devastations of that war convinced, at least the governments of the United States
and France, that they should thereafter renounce war as an instrument of national policy, and they
consequently subscribed the Briand-Kellog Pact. Those horrors and devastations were increased a
hundred fold, if not more, in this second World War, but even before this war occurred, our own people,
through our Constitutional delegates, who framed the Commonwealth Constitution also adopted the
same doctrine, and embodied an express renunciation of war as an instrument of national policy in the
instrument that they drafted. It is true that in section 3, Article II, above-cited, our Constitution adopts
the generally accepted principles of International Law as a part of the law of the Nation. But, of course,
this adoption is exclusive of those principles of International Law which might involve recognition of war
as an instrument of national policy. It is plain that on the side of the Allies, the present war is purely
defensive. When Japan started said war, treacherously and without previous declaration, and attacked
Pearl Harbor and the Philippines on those two fateful days of December 7 and 8, 1941, she employed
war as an instrument of the national policy. Under the Briand-Kellog Pact and our Commonwealth
Constitution, the United States and the Commonwealth Government could not possibly have recognized
in Japan any right, as against them, to employ that war as an instrument of her national policy, and,
consequently, they could not have recognized in Japan power to set up in the Philippines the puppet
government that she later set up, because such power would be a mere incident or consequence of the
war itself. The authorities agree that such a power, under the cited rules, is said to a right derived from
war. (67 C.J., p. 421, sec. 171.) There can be no question that the United States and the Commonwealth
Governments were free to refuse to be bound by those rules when they made their respective
renunciations above referred to. Indeed, all the United Nations have exercised this free right in their
Charter recently signed at San Francisco.

As necessary consequence of this, those rules of International Law were no longer applicable to the
Philippines and to the United States at the time of the Japanese invasion as a corollary, it follows that
we have no legal foundation on which to base the proposition that the acts of that Japanese-sponsored
government in the Philippines were valid and binding. Moreover, I am of opinion, that although at the
time of the Japanese invasion and up to the present, the United States retains over the Philippines, a
certain measure of sovereignty, it is only for certain specified purposes enumerated in the Tydings-
McDufie Act of the Commonwealth Constitution. (Ordinance appended to the Constitution.) And
our territory was at the time of the Japanese invasion not a territory of the United States, within the
meaning of the laws of war governing war-like operations on enemy territory. Our territory is
significantly called "The National Territory" in Article I of our Constitution and this bears the stamps of
express approval of the United States Government. The Philippines has been recognized and admitted
as a member of the United Nations. We, therefore, had our own national and territorial identity
previous to that invasion. Our nation was not at war with the Filipinos. And line with this, the Japanese
army, in time, released Filipino war prisoners captured in Bataan. Lt. Gen. Maeda, Chief of Staff, Imperial
Japanese Forces, in his speech of January 2, 1942, said:

. . . we had not the slighest intensions to make your people our enemy; rather we considered
them as our friends who will join us has hand-in-hand in the establishment of an orderly Greater
East Asia. . . ., (Official Gazette, edited at the Office of the Executive Commission, Vol. I, p. 55.)

If the Philippines was a neutral territory when invaded by the Japanese, the following principles from
Lawrence, International Law (7th ed.), p. 603, are pertinent:

The Duties of Belligerent States Towards Neutral States. — . . . To refrain from carrying on
hostilities within neutral territory. — We have already seen that, though this obligation was
recognized in theory during the infancy of International law, it was often very imperfectly
observed in practice. But in modern times it has been strickly enforced, and any State which
knowingly ordered warlike operations to be carried on in neutral territory . . . would bring down
upon itself the reprobation of civilized mankind. Hostilities may be carried on in the territory of
either belligerent, on the high seas, and in territory belonging to no one. Neutral land and
neutral territorial waters are sacred. No acts of warfare may lawfully take place within them. . . .
(Emphasis ours.)

In all the cases and authorities supporting the power or right to set up a provisional government, the
belligerent had the right to invade or occupy the territory in the first instance. Such was not the case
with the Philippines. President Roosevelt, in his message to the Filipino people, soon after the landing of
American Forces in Leyte, on October 20, 1944, characterized Japan's invasion and occupation of the
Philippines as "the barbarous, unprovoked and treacherous attack upon the Philippines," and he
announced the American people's "firm determination to punish the guilty." (41 Off. Gaz., 149.)
(Emphasis ours.) The illustrious leader of the United Nations could not have in more unmistakable terms
the utter illegality of that invasion and occupation. If the establishment of a provinsional government in
occupied territory by a belligerent is "a mere application or extension of the force by which the invasion
or occupation was effected" (67 C.J., p. 421, sec 171), the illegality of the invasion, would necessarily
permeate the government, which was its mere application or extention.

The fact that shortly before December 8, 1941, the date of the "barbarous, unprovoked and treacherous
attack," the meager and almost untrained forces of the Philippine Army had been inducted into the
American Army, did not change the neutral status of the Philippines. That military measure had been
adopted for purely defensive purposes. Nothing could be farther from the minds of the government and
military leaders of the United States and the Philippines in adopting it than to embark upon any
aggressive or warlike enterprise against any other nation. It is an old and honored rule dating as far back
as the 18th century that even solemn promises of assistance made before the war by a neutral to a
nation which later becomes a belligerent, would not change the status of the neutral even if such
promises were carried out, so long as they were made for purely defensive purposes. In the words of
Vattel "when a sovereign furnishes the succor due in virtue of a former defensive alliance, he does not
associate himself in the war. Therefore he may fulfill his engagements and yet preserve an exact
neutrality." (Lawrence, Principles of International Law [7th ed.], pp. 585, 586.)

If the Filipinos had, from contemptible cowardice and fear, allowed their shores to be invaded, and their
territory occupied by the Japanese without resistance, such invasion occupation would undoubtedly
have been considered in violation of International Law. Should the Filipinos be punished for having had
the patriotism, bravery, and heroism to fight in defense of the sacredness of their land, the sanctity of
their homes, and the honor and dignity of their government by giving validity, in whatever limited
measure, to the lawless acts of the ruthless enemy who thus overran their country, and robbed them of
the tranquility and happiness of their daily lives? And yet, to my mind, to give any measure of validity or
binding effect to the proceedings of the Japanese-sponsored Court of First Instance of Manila, involved
herein, would be to give that much validity or effect to the acts of those same invaders. To equalize the
consequences of a lawful and a wrongful invasion of occupation, would be to equalize right and wrong,
uphold the creed that might makes right, and adopt "the law of the jungle."

If said Japanese-sponsored government was not a de facto government, it would seem clearly to follow
that its "Court of First Instance of Manila" was not a de facto court. But it should additionally be stated
that for it be a de facto court, its judge had to be a de facto judge, which he could not be, as presently
demonstrated.

As said by President Osmeña, in replying to the speech of General of the Army MacArthur when the
latter turned over to him the full powers and responsibilities of the Commonwealth Government, on
February 27, 1945:

xxx xxx xxx

The time has come when the world should know that when our forces surrendered in Bataan
and Corregidor, resistance to the enemy was taken up by the people itself — resistance which
was inarticulate and disorganized in its inception but which grew from the day to day and from
island until it broke out into an open warfare against the enemy.

The fight against the enemy was truly a people's war because it counted with the wholehearted
support of the masses. From the humble peasant to the barrio school teacher, from the
volunteer guard to the women's auxilliary service units, from the loyal local official to the barrio
folk — each and every one of those contributed his share in the great crusade for liberation.

The guerrillas knew that without the support of the civilian population, they could not survive.
Whole town and villages dared enemy reprisal to oppose the hated invader openly or give
assistance to the underground movement. . . . (41 Off. Gaz., 88, 89.)

Under these facts, taken together with the General of the Army MacArthur's accurate statement that
the "Republic of the Philippines" had been established under enemy duress, it must be presumed — to
say the least — that the judge who presided over the proceedings in question during the Japanese
occupation, firstly, accepted his appointment under duress; and secondly, acted by virtue of that
appointment under the same duress. In such circumstances he could not have acted in the bona
fide belief that the new "courts" created by or under the orders of the Japanese Military Commander in
chief had been legally created--among them the "Court of first Instance of Manila," — that the Chairman
of the "Philippine Executive Commission" or the President of the "Republic of the Philippines", whoever
appointed him, and conferred upon him a valid title to his office and a legitimate jurisdiction to act as
such judge. Good faith is essential for the existence of a de facto judge (Tayko vs. Capistrano, 53 Phil.,
866, 872). The very idea of enemy duress would necessarily imply that but for the duress exerted upon
him by the enemy he would have refused to accept the appointment and to act thereunder. And why?
Because he must be presumed to know that the office to which he was thus appointed had been
created by the enemy in open defiance of the Commonwealth Constitution and the laws and regulation
promulgated by our Commonwealth Government, and that his acceptance of said office and his acting
therein, if willfully done, would have been no less than an open hostility to the very sovereignty of the
United Sates and to the Commonwealth Government, and a renunciation of his allegiance to both. There
is no middle ground here. Either the judge acted purely under duress, in which case his acts would be
null and void; or maliciously in defiance of said governments, in which case his acts would be null and
void for more serious reasons.

The courts created here by the Japanese government had to look for the source of their supposed
authority to the orders of the Japanese Military Commander in chief and the so-called Constitution of
the "Republic of the Philippines," which had been adopted in a manner which would shock the
conscience of democratic peoples, and which was designed to supplant the Constitution which had been
duly adopted by the Filipino people in a Constitutional Convention of their duly elected Constitutional
Delegates. And it was decreed that the Commander in chief of the Imperial Japanese Forces "shall
exercise jurisdiction over judicial courts." (Vol. 1, p. 7, Official Journal of the Japanese Military
Administration, cited on pp. 2, 3, of the order of the respondent judge complained of and marked
Exhibit H of the petition for mandamus.) How can our present courts legitimately recognize any efficacy
in the proceedings of such an exotic judicial system, wherein the Commander in Chief of the Imperial
Japanese Forces possessed the highest judicial jurisdiction?

III

The courts of those governments were entirely different from our Commonwealth courts before
and after the Japanese occupation.

Executive Order No. 36 of the President of the Philippines, dated March 10, 1945, in its very first
paragraph, states the prime concern of the government "to re-establish the courts as fast as provinces
are liberated from the Japanese occupation." If the courts under the Japanese-sponsored government of
the "Republic of the Philippines" were the same Commonwealth courts that existed here under the
Constitution at the time of the Japanese invasion, President Osmeña would not be speaking of re-
establishing those courts in his aforesaid Executive Order. For soothe, how could those courts under the
"Republic of the Philippines" be the courts of the Commonwealth of the Philippines when they were not
functioning under the Constitution of the Commonwealth and the laws enacted in pursuance of said
Constitution? The jurisdiction of the Commonwealth courts was defined and conferred under the
Commonwealth Constitution and the pertinent legislation enacted thereunder, that of the Japanese-
sponsored courts was defined and conferred by the orders and decrees of the Japanese Commander in
Chief, and, perhaps, the decrees of the "Philippine Executive Commission" and the laws of the so-called
Legislature under the Republic, which was not composed of the elected representatives of the people.
The Justices and Judges of the Commonwealth courts had to be appointed by the President of the
Commonwealth with confirmation by the Commission on Appointments, pursuant to the
Commonwealth Constitution. The Chief Justice of the Supreme Court, under the "Philippine Executive
Commission" was appointed by the Commander in Chief of the Imperial Japanese Forces, and the
Associate Justices of the Supreme Court, the Presiding Justice and Associate Justices of the Court of
Appeals, the Judges of first Instance and of all inferior courts were appointed by the Chairman of the
Executive Commission, at first, and later, by the President of the Republic, of course, without
confirmation by the Commission on Appointments under the Commonwealth Constitution. The Chief
Justice and Associate Justices of the Supreme Court, the President and Associate Justices of the Court of
Appeals, and the Judges of First Instance and of all inferior courts in the Commonwealth judicial system,
had to swear to support and defend the Commonwealth Constitution, while this was impossible under
the Japanese-sponsored government. In the Commonwealth judicial system, if a Justice or Judge should
die or incapacitated to continue in the discharge of his official duties, his successor was appointed by the
Commonwealth President with confirmation by the Commission on Appointments, and said successor
had to swear to support and defend the Commonwealth Constitution; in the exotic judicial system
implanted here by the Japanese, if a Justice or Judge should die or incapacitated, his successor would be
appointed by the Japanese Commander in Chief, if the dead or incapacitated incumbent should be the
Chief Justice of the Supreme Court, or otherwise, by the Chairman of the "Executive Commission" or the
President of the "Republic", of course without confirmation by the Commission on Appointments of the
Commonwealth Congress, and, of course, without the successor swearing to support and defend the
Commonwealth Constitution.

If, as we believe having conclusively shown, the Japanese-sponsored courts were not the same
Commonwealth courts, the conclusion is unavoidable that any jurisdiction possessed by the former and
any cases left pending therein, were not and could not be automatically transfered to the
Commonwealth courts which we re-established under Executive Order No. 36. For the purpose, a special
legislation was necessary.

Executive Order No. 37, in my humble opinion, does not, as held by the majority, imply that the
President recognized as valid the proceedings in all cases appealed to the Court of Appeals. Section 2 of
that order simply provides that all cases which have been duly appealed to the Court of Appeals shall be
transmitted to the Supreme Court for final decision. The adverb "duly" would indicate that the President
foresaw the possibility of appeals not having been duly taken. All cases appealed to the Court of Appeals
before the war and the otherwise duly appealed, would come under the phrase "duly appealed" in this
section of the Executive Order. But considering the determined and firm attitude of the Commonwealth
Government towards those Japanese-sponsored governments since the beginning, it would seem
inconceivable that the President Osmeña, in section 2 of Executive Order No. 37, intended to include
therein appeals taken to the Japanese-sponsored Court of Appeals, or from the Japanese-sponsored
inferior courts. It should be remembered that in the Executive Order immediately preceeding and issued
on the same date, the President speaks of re-establishing the courts as fast as provinces were liberated
from the Japanese occupation.

IV

The question boils down to whether the Commonwealth Government, as now restored, is to be
bound by the acts of either or both of those Japanese-sponsored governments.

In the last analysis, in deciding the question of validity or nullity of the proceedings involved herein, we
are confronted with the necessity to decide whether the Court of first Instance of Manila and this
Supreme Court, as re-established under the Commonwealth Constitution, and the entire
Commonwealth Government, are to be bound by the acts of the said Japanese-sponsored court and
government. To propound this question is, to my mind, to answer it most decidedly in the negative, not
only upon the ground of the legal principles but also for the reasons of national dignity and international
decency. To answer the question in the affirmative would be nothing short for legalizing the Japanese
invasion and occupation of the Philippines. Indeed, it would be virtual submission to the dictation of an
invader our people's just hatred of whom gave rise to the epic Philippine resistance movement, which
has won the admiration of the entire civilized world.

Even considerations of policy or practical convenience militate against petitioner's contention.

In this connection, the respondent judge, in his order of June 6, 1945, complained of, has the following
to say:
 It is contended, however, that the judicial system implanted by the Philippine Executive
Commission and the Republic was the same as that of the Commonwealth prior to Japanese
occupation; that the laws administered and enforced by said courts during the existence of said
regime were the same laws on the statute books of Commonwealth before Japanese
occupation, and that even the judges who presided them were, in many instances, the same
persons who held the position prior to the Japanese occupation. All this may be true, but other
facts are just as stubborn and pitiless. One of them is that said courts were of a government
alien to the Commonwealth Government. The laws they enforced were, true enough, laws of
the Commonwealth prior to Japanese occupation, but they had become the laws — and the
Courts had become the institutions-of Japan by adoption (U.S. vs. Reiter, 27 F. Case No. 16,146),
as they became later on the laws and institution of the Philippine Executive Commission and the
Republic of the Philippines. No amount of argument or legal fiction can obliterate this fact.

Besides, I am of the opinion that the validity of the acts of the courts in the "judicial system implanted
by the Philippine Executive Commission and the Republic "would not depend upon the laws that they
"administered and enforced", but upon the authority by virtue of which they acted. If the members of
this Court were to decide the instant case in strict accordance with the Constitution and the laws of the
Commonwealth but not by the authority that they possess in their official capacity as the Supreme Court
of the Philippines, but merely as lawyers, their decision would surely be null and void. And yet, I am
firmly of opinion that whoever was the "judge" of the Japanese sponsored Court of First Instance of
Manila who presided over the said court when the proceedings and processes in the dispute were had,
in acting by virtue of the supposed authority which he was supposed to have received from that
government, did so with no more legal power than if he had acted as a mere lawyer applying the same
laws to the case. If duplication of work or effort, or even if confussion, should be alleged to possibly
arise from a declaration of nullity or judicial proceedings had before those Japanese-sponsored courts, it
should suffice to answer that the party so complaining in voluntarily resorting to such courts should be
prepared to assume the consequences of his voluntary act. On the other hand, his convenience should
not be allowed to visit upon the majority of the inhabitants of this country, the dire consequences of a
sweeping and wholesale validation of judicial proceedings in those courts. Let us set forth a few
considerations apropos of this assertion. It is a fact of general knowledge that during the Japanese
occupation of the Philippines, the overwhelming majority of our people and other resident inhabitants
were literally afraid to go any place where there were Japanese sentries, soldiers or even civilians, and
that these sentries were posted at the entrance into cities and towns and at government offices; that
the feared Japanese "M. P.'s" or Kempeitai's" were a constant terror to them; and lastly, that the greater
number who lived or had evacuated to places for from the Japanese, were found precisely in the cities
and towns where the courts were located; and as a consequence, the great majority of the people were
very strongly adverse to traveling any considerable distance from their homes and were, one might say,
in constant hiding. Add to these circumstances, the fact of the practical absence of transportation
facilities and the no less important fact of the economic structure having been so dislocated as to have
impoverished the many in exchange for the enrichment of the few — and we shall have a fair picture of
the practical difficulties which the ordinary litigant would in those days have encountered in defending
his rights against anyone of the favored few who would bring him to court. It should be easy to realize
how hard it was for instances, to procure the attendance of witnesses, principally because of the fact
that most of them were in hiding or, at least, afraid to enter the cities and towns, and also because of
then generally difficult and abnormal conditions prevailing. Under such conditions, cases or denial of a
party's day in court expected. Such denial might arise from many a cause. It might be party's fear to
appear before the court because in doing so, he would have had to get near the feared Japanese. It
might be because he did not recognize any legal authority in that court, or it might be his down-right
repugnance of the hated enemy. And I dare say that among such people would be found more than
seventeen million Filipinos. These are but a few of countless cause. So that if some form of validation of
such judicial proceedings were to be attempted, all necessary safeguards should be provided to avoid
that in any particular case the validation should violate any litigant's constitutional right to his day in
court, within the full meaning of the phrase, or any other constitutional or statutory right of his. More
people, I am afraid, would be prejudiced than would be benefited by a wholesale validation of said
proceedings.
Much concern has been shown for the possible confusion which might result from a decision declaring
null and void the acts processes of the Japanese-sponsored governments in the Philippines. I think, this
aspect of the question has been unduly stressed. The situation is not without remedy, but the remedy
lies with the legislature and not with the courts. As the courts cannot create a new or special jurisdiction
for themselves, which is a legislative function, and as the situation demands such new or special
jurisdiction, let the legislature act in the premises. For instance, the Congress may enact a law conferring
a special jurisdiction upon the courts of its selection, whereby said courts may, after hearing all the
parties interested, and taking all the necessary safeguards, so that, a party's day in court or other
constitutional or statutory right under the Commonwealth Government should not be prejudiced by any
of said acts, processes or proceedings, particullarly, those in Japanese-sponsored courts, and subject to
such other conditions as the special law may provide, validate the corresponding acts, processes or
proceedings. This, to my mind, would be more conducive to a maximum of benefit and a minimum of
prejudice to the inhabitants of this country, rather than the procedure favored by the majority.

Finally, let us not equalize the conditions then prevailing in Manila to that prevailing in the provinces,
where the greater number of the people where then living outside the towns, in the farms and the hills.
These people constitute the great majority of the eighteen million Filipinos. To them the semblance of
an administration of justice which Japanese allowed, was practically unknown. But they constituted the
majority of loyal citizens to whom President Roosevelt's message of October 23, 1943 refers. They —
the majority of our people — had an unshaken faith in the arrival of American aid here and the final
triumph of the Allied cause. They were willing to wait for the restoration of their rightful government,
with its courts and other institutions, for the settlement of their differences. May in their common
hardship and sufferings under yoke of foreign oppression, they had not much time to think of such
differences, if they did not utterly forget them. Their undoubted hatred of the invader was enough to
keep them away from the judicial system that said invader allowed to have. Those who voluntarily went
to the courts in those tragic days belong to the small minority.

As to the public order — why! any public order which then existed was not due to the courts or other
departments of the puppet government. It was maintained at the point of the bayonet by the Japanese
army, and in their own unique fashion.

G.R. No. 82544 June 28, 1988

IN THE MATTER OF THE PETITION FOR HABEAS CORPUS OF: ANDREW HARVEY, JOHN SHERMAN and
ADRIAAN VAN DEL ELSHOUT, petitioners,
vs.
HONORABLE COMMISSIONER MIRIAM DEFENSOR SANTIAGO, COMMISSION ON IMMIGRATION AND
DEPORTATION, respondent.

MELENCIO-HERRERA, J.:

A petition for Habeas Corpus.

Petitioners Andrew Harvey and John Sherman, 52 and 72 years, respectively, are both American
nationals residing at Pagsanjan, Laguna, while Adriaan Van Elshout, 58 years old, is a Dutch citizen also
residing at Pagsanjan, Laguna.

The case stems from the apprehension of petitioners on 27 February 1988 from their respective
residences by agents of the Commission on Immigration and Deportation (CID) by virtue of Mission
Orders issued by respondent Commissioner Miriam Defensor Santiago of the CID. Petitioners are
presently detained at the CID Detention Center.

Petitioners were among the twenty-two (22) suspected alien pedophiles who were apprehended after
three months of close surveillance by CID agents in Pagsanjan, Laguna. Two (2) days after apprehension,
or on 29 February 1988, seventeen (17) of the twenty-two (22) arrested aliens opted for self-
deportation and have left the country. One was released for lack of evidence; another was charged not
for being a pedophile but for working without a valid working visa. Thus, of the original twenty two (22),
only the three petitioners have chosen to face deportation.

Seized during petitioners apprehension were rolls of photo negatives and photos of the suspected child
prostitutes shown in salacious poses as well as boys and girls engaged in the sex act. There were also
posters and other literature advertising the child prostitutes.

The "Operation Report," on Andrew Harvey and Richard Sherman dated 29 February 1988 stated:

xxx xxx xxx

ANDREW MARK HARVEY was found together with two young boys.

RICHARD SHERMAN was found with two naked boys inside his room.

In respect of Van Den Elshout the "After Mission Report," dated 27 February 1988 read in part:

Noted:

There were two (2) children ages 14 & 16 which subject readily
accepted having been in his care and live-in for quite sometime.

On 4 March 1988, deportation proceedings were instituted against petitioners for being undesirable
aliens under Section 69 of the Revised Administrative Code (Deportation Case No. 88-13). The "Charge
Sheet" read inter alia:

Wherefore, this Office charges the respondents for deportation, as undesirable aliens, in
that: they, being pedophiles, are inimical to public morals, public health and public
safety as provided in Section 69 of the Revised Administrative Code.

On 7 March 1988, Warrants of Arrest were issued by respondent against petitioners for violation of
Sections 37, 45 and 46 of the Immigration Act and Section 69 of the Revised Administrative Code On the
same date, the Board of Special Inquiry III commenced trial against petitioners.

On 14 March 1988, petitioners filed an Urgent Petition for Release Under Bond alleging that their health
was being seriously affected by their continuous detention. Upon recommendation of the Board of
Commissioners for their provisional release, respondent ordered the CID doctor to examine petitioners,
who certified that petitioners were healthy.

On 22 March 1988, petitioners filed a Petition for Bail which, however, respondent denied considering
the certification by the CID physician that petitioners were healthy. To avoid congestion, respondent
ordered petitioners' transfer to the CID detention cell at Fort Bonifacio, but the transfer was deferred
pending trial due to the difficulty of transporting them to and from the CID where trial was on-going.

On 4 April 1988 petitioner Andrew Harvey filed a Manifestation/Motion stating that he had "finally
agreed to a self-deportation" and praying that he be "provisionally released for at least 15 days and
placed under the custody of Atty. Asinas before he voluntarily departs the country." On 7 April 1988, the
Board of Special Inquiry — III allowed provisional release of five (5) days only under certain conditions.
However, it appears that on the same date that the aforesaid Manifestation/ Motion was filed, Harvey
and his co-petitioners had already filed the present petition.
On 4 April 1988, as heretofore stated, petitioners availed of this Petition for a Writ of Habeas Corpus. A
Return of the Writ was filed by the Solicitor General and the Court heard the case on oral argument on
20 April 1988. A Traverse to the Writ was presented by petitioners to which a Reply was filed by the
Solicitor General.

Petitioners question the validity of their detention on the following grounds:

1) There is no provision in the Philippine Immigration Act of 1940 nor under Section 69 of the Revised
Administrative Code, which legally clothes the Commissioner with any authority to arrest and detain
petitioners pending determination of the existence of a probable cause leading to an administrative
investigation.

2) Respondent violated Section 2, Article III of the 1987 Constitution prohibiting unreasonable searches
and seizures since the CID agents were not clothed with valid Warrants of arrest, search and seizure as
required by the said provision.

3) Mere confidential information made to the CID agents and their suspicion of the activities of
petitioners that they are pedophiles, coupled with their association with other suspected pedophiles,
are not valid legal grounds for their arrest and detention unless they are caught in the act. They further
allege that being a pedophile is not punishable by any Philippine Law nor is it a crime to be a pedophile.

We reject petitioners' contentions and uphold respondent's official acts ably defended by the Solicitor
General.

There can be no question that the right against unreasonable searches and seizures guaranteed by
Article III, Section 2 of the 1987 Constitution, is available to all persons, including aliens, whether
accused of crime or not (Moncado vs. People's Court, 80 Phil. 1 [1948]. One of the constitutional
requirements of a valid search warrant or warrant of arrest is that it must be based upon probable
cause. Probable cause has been defined as referring to "such facts and circumstances antecedent to the
issuance of the warrant that in themselves are sufficient to induce a cautious man to rely on them and
act in pursuance thereof." (People vs. Syjuco 64 Phil. 667 [1937]; Alverez vs. CFI, 64 Phil. 33 [1937]).

The 1985 Rules on Criminal Procedure also provide that an arrest wit a warrant may be effected by a
peace officer or even a private person (1) when such person has committed, actually committing, or is
attempting to commit an offense in his presence; and (2) when an offense has, in fact, been committed
and he has personal knowledge of facts indicating that the person to be arrested has committed it (Rule
113, Section 5).

In this case, the arrest of petitioners was based on probable cause determined after close surveillance
for three (3) months during which period their activities were monitored. The existence of probable
cause justified the arrest and the seizure of the photo negatives, photographs and posters without
warrant (See Papa vs. Mago, L-27360, February 28, 1968,22 SCRA 857; People vs. Court of First Instance
of Rizal, L-41686, November 17, 1980, 101 SCRA 86, cited in CRUZ, Constitutional Law, 1987 ed., p. 143).
Those articles were seized as an incident to a lawful arrest and, are therefore, admissible in evidence
(Section 12, Rule 126,1985 Rules on criminal Procedure).

But even assuming arguendo that the arrest of petitioners was not valid at its inception, the records
show that formal deportation charges have been filed against them, as undesirable aliens, on 4 March
1988. Warrants of arrest were issued against them on 7 March 1988 "for violation of Section 37, 45 and
46 of the Immigration Act and Section 69 of the Administrative Code." A hearing is presently being
conducted by a Board of Special Inquiry. The restraint against their persons, therefore, has become
legal. The Writ has served its purpose. The process of the law is being followed (Cruz vs. Montoya, L-
39823, February 25, 1975, 62 SCRA 543). "were a person's detention was later made by virtue of a
judicial order in relation to criminal cases subsequently filed against the detainee, his petition for hebeas
corpus becomes moot and academic" (Beltran vs. Garcia, L-49014, April 30, 1979, 89 SCRA 717). "It is a
fumdamental rule that a writ of habeas corpus will not be granted when the confinement is or has
become legal, although such confinement was illegal at the beginning" (Matsura vs. Director of Prisons,
77 Phil. 1050 [1947]).

That petitioners were not "caught in the act" does not make their arrest illegal. Petitioners were found
with young boys in their respective rooms, the ones with John Sherman being naked. Under those
circumstances the CID agents had reasonable grounds to believe that petitioners had committed
"pedophilia" defined as "psychosexual perversion involving children" (Kraft-Ebbing Psychopatia Sexualis
p. 555; Paraphilia (or unusual sexual activity) in which children are the preferred sexual object"
(Webster's Third New International Dictionary, 1971 ed., p. 1665) [Solicitor General's Return of the Writ,
on p. 101. While not a crime under the Revised Penal Code, it is behavior offensive to public morals and
violative of the declared policy of the State to promote and protect the physical, moral, spiritual, and
social well-being of our youth (Article II, Section 13, 1987 Constitution).

At any rate, the filing by petitioners of a petition to be released on bail should be considered as a waiver
of any irregularity attending their arrest and estops them from questioning its validity (Callanta v.
Villanueva, L-24646 & L-24674, June 20, 1977, 77 SCRA 377; Bagcal vs. Villaraza, L-61770, January 31,
1983, 120 SCRA 525).

The deportation charges instituted by respondent Commissioner are in accordance with Section 37(a) of
the Philippine Immigration Act of 1940, in relation to Section 69 of the Revised Administrative Code.
Section 37(a) provides in part:

(a) The following aliens shall be arrested upon the warrant of the Commissioner of
Immigration and Deportation or any other officer designated by him for the purpose
and deported upon the warrant of the Commissioner of Immigration and Deportation
after a determination by the Board of Commissioners of the existence of the ground for
deportation as charged against the alien;

xxx xxx xxx

The foregoing provision should be construed in its entirety in view of the summary and indivisible nature
of a deportation proceeding, otherwise, the very purpose of deportation proceeding would be defeated.

Section 37(a) is not constitutionally proscribed (Morano vs. Vivo, L-22196, June 30, 1967, 20 SCRA 562).
The specific constraints in both the 1935 1 and 1987 2 Constitutions, which are substantially Identical,
contemplate prosecutions essentially criminal in nature. Deportation proceedings, on the other hand,
are administrative in character. An order of deportation is never construed as a punishment. It is
preventive, not a penal process. It need not be conducted strictly in accordance with ordinary Court
proceedings.

It is of course well-settled that deportation proceedings do not constitute a criminal

action. The order of deportation is not a punishment, (Maliler vs. Eby, 264 U.S., 32), it
being merely the return to his country of an alien who has broken the conditions upon
which he could continue to reside within our borders (U.S. vs. De los Santos, 33 Phil.,
397). The deportation proceedings are administrative in character, (Kessler vs. Stracker
307 U.S., 22) summary in nature, and need not be conducted strictly in accordance with
the ordinary court proceedings (Murdock vs. Clark, 53 F. [2d], 155). It is essential,
however, that the warrant of arrest shall give the alien sufficient information about the
charges against him, relating the facts relied upon. (U.S. vs. Uhl 211 F., 628.) It is also
essential that he be given a fair hearing with the assistance of counsel, if he so desires,
before unprejudiced investigators (Strench vs. Pedaris, 55 F. [2d], 597; Ex parte Jew You
On, 16 F. [2d], 153). However, all the strict rules of evidence governing judicial
 controversies do not need to be observed; only such as are fumdamental and essential
like the right of cross-examination. (U.S. vs. Hughes, 104 F. [2d], 14; Murdock vs. Clark,
53 F. [2d], 155.) Hearsay evidence may even be admitted, provided the alien is given the
opportunity to explain or rebut it (Morrell vs. Baker, 270 F., 577; Sercerchi vs. Ward, 27
F. Supp., 437). (Lao Tang Bun vs. Fabre 81 Phil. 682 [1948]).

The ruling in Vivo vs. Montesa (G. R. No. 24576, July 29, 1968, 24 SCRA 155) that "the issuance of
warrants of arrest by the Commissioner of Immigration, solely for purposes of investigation and before a
final order of deportation is issued, conflicts with paragraph 3, Section I of Article III of the Constitution"
(referring to the 1935 Constitution) 3 is not invocable herein. Respondent Commissioner's Warrant of
Arrest issued on 7 March 1988 did not order petitioners to appear and show cause why they should not
be deported. They were issued specifically "for violation of Sections 37, 45 and 46 of the Immigration
Act and Section 69 of the Revised Administrative Code." Before that, deportation proceedings had been
commenced against them as undesirable aliens on 4 March 1988 and the arrest was a step preliminary
to their possible deportation.

Section 37 of the Immigration Law, which empowers the Commissioner of Immigration

to issue warrants for the arrest of overstaying aliens is constitutional. The arrest is a
stop preliminary to the deportation of the aliens who had violated the condition of their
stay in this country. (Morano vs. Vivo, L-22196, June 30, 1967, 20 SCRA 562).

To rule otherwise would be to render the authority given the Commissioner nugatory to the detriment
of the State.

The pertinent provision of Commonwealth Act No. 613, as amended, which gives
authority to the Commissioner of Immigration to order the arrest of an alien temporary
visitor preparatory to his deportation for failure to put up new bonds required for the
stay, is not unconstitutional.

xxx xxx xxx

... Such a step is necessary to enable the Commissioner to prepare the ground for his
deportation under Section 37[al of Commonwealth Act 613. A contrary interpretation
would render such power nugatory to the detriment of the State. (Ng Hua To vs. Galang,
G. R. No. 10145, February 29, 1964, 10 SCRA 411).

"The requirement of probable cause, to be determined by a Judge, does not extend to deportation
proceedings." (Morano vs. Vivo, supra, citing Tiu Chun Hai vs. Commissioner, infra). There need be no
"truncated" recourse to both judicial and administrative warrants in a single deportation proceedings.

The foregoing does not deviate from the ruling in Qua Chee Gan vs. Deportation Board (G. R. No. 10280,
September 30, 1963, 9 SCRA 27 [1963]) reiterated in Vivo vs. Montesa, supra, that "under the express
terms of our Constitution (the 1935 Constitution), it is therefore even doubtful whether the arrest of an
individual may be ordered by any authority other than a judge if the purpose is merely to determine the
existence of a probable cause, leading to an administrative investigation." For, as heretofore stated,
probable cause had already been shown to exist before the warrants of arrest were issued.

What is essential is that there should be a specific charge against the alien intended to be arrested and
deported, that a fair hearing be conducted (Section 37[c]) with the assistance of counsel, if desired, and
that the charge be substantiated by competent evidence. Thus, Section 69 of the Revised Administrative
Code explicitly provides:

Sec. 69. Deportation of subject of foreign power. A subject of a foreign power residing in
the Philippines shall not be deported, expelled, or excluded from said Islands or
 repatriated to his own country by the President of the Philippines except upon prior
investigation, conducted by said Executive or his authorized agent, of the ground upon
which such action is contemplated. In such a case the person concerned shall be
informed of the charge or charges against him and he shall be allowed not less than 3
days for the preparation of his defense. He shall also have the right to be heard by
himself or counsel, to produce witnesses in his own behalf, and to cross-examine the
opposing witnesses.

The denial by respondent Commissioner of petitioners' release on bail, also challenged by them, was in
order because in deportation proceedings, the right to bail is not a matter of right but a matter of
discretion on the part of the Commissioner of Immigration and Deportation. Thus, Section 37(e) of the
Philippine Immigration Act of 1940 provides that "any alien under arrest in a deportation proceeding
may be released under bond or under such other conditions as may be imposed by the Commissioner of
Immigration." The use of the word "may" in said provision indicates that the grant of bail is merely
permissive and not mandatory on the part of the Commissioner. The exercise of the power is wholly
discretionary (Ong Hee Sang vs. Commissioner of Immigration, L-9700, February 28,1962, 4 SCRA 442).
"Neither the Constitution nor Section 69 of the Revised Administrative Code guarantees the right of
aliens facing deportation to provisional liberty on bail." (Tiu Chun Hai et al vs. Deportation Board, 104
Phil. 949 [1958]). As deportation proceedings do not partake of the nature of a criminal action, the
constitutional guarantee to bail may not be invoked by aliens in said proceedings (Ong Hee Sang vs.
Commissioner of Immigration, supra).

Every sovereign power has the inherent power to exclude aliens from its territory upon such grounds as
it may deem proper for its self-preservation or public interest (Lao Tan Bun vs. Fabre 81 Phil. 682
[1948]). The power to deport aliens is an act of State, an act done by or under the authority of the
sovereign power (In re McCulloch Dick, 38 Phil. 41 [1918]). It is a police measure against undesirable
aliens whose continued presence in the country is found to be injurious to the public good and the
domestic tranquility of the people (Forbes vs. Chuoco Tiaco et al., 16 Phil. 534 [1910]). Particularly so in
this case where the State has expressly committed itself to defend the tight of children to assistance and
special protection from all forms of neglect, abuse, cruelty, exploitation, and other conditions prejudicial
to their development (Article XV, Section 3[2]). Respondent Commissioner of Immigration and
Deportation, in instituting deportation proceedings against petitioners, acted in the interests of the
State.

WHEREFORE, the Petition is dismissed and the Writ of Habeas Corpus is hereby denied.